Chujai's weekly income allowance for snacks is 300 baht and she buys 5 bars of chocolate per week. When her income increases to 330 baht, chujai buys 6 bars per week. The income elasticity of chujai's demand for chocolate is about:.

Income elasticity of demand is defined as ratio of change in quantity demanded over changes in income.
Income elasticity of demand = Change in quantity demanded / Change in income

Change in quantity demanded =New qty- old qty/ old qty

=( 6 - 5 )/ 5
= 1 / 5

= 0.5

Change in income= New income - old income/ old income

= (330baht - 300baht) / 300baht
= 30 / 300

= 0.1

Therefore, Income elasticity of demand = 0.5 / 0.1 = 2

We can see that the income elasticity of demand is positive( +2)

We can conclude that the chocolate that Chujai spends on is a normal good.

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