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Janice earns an income of $2,000 a week and goes out to lunch 3 times a week. If her income increased to $2,100 she would go out to lunch 4 times a week. Compute Janice's income elasticity of demand. Please explain how to calculate this.
HINT: Use the Income Elasticity formula: ¦EY¦= Percentage change in Quantity demanded/Percentage change in Income.
Take the absolute value of EY, ¦EY¦and determine the income-elasticity of demand.
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