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6/9/2019 MindTap - Cengage Learning Points: 0.33 / 1 Close Explanation Explanation: The income elasticity of demand measures how much consumers change the quantity demanded of a good when their income changes. You can calculate the income elasticity of demand for horses by dividing the percentage change in quantity demanded by the percentage change in income: The intuition behind this result is as follows: If income increases by 1% in Royal City, then there is a 0.75% increase in the quantity of horses < Back to Assignment Attempts: 1.3 Average: 1.3 / 2 7. Using the income elasticity of demand to characterize goods Data collected from the economy of Royal City reveals that a 16% increase in income leads to the following changes: A 12% increase in the quantity of horses demanded A 14% decrease in the quantity of clubs demanded A 28% increase in the quantity of diamonds demanded
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