If the average household income in some town increased from $50,000 to $60,000,and the their expenditure on housing increased from $1,400 per month to $1,484 per month,the income elasticity of demand for housing is:

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The income elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in income. Here, the percentage change in quantity demanded (expenditure on housing) is ($1,484 - $1,400) / $1,400 = 0.06 or 6%, and the percentage change in income is ($60,000 - $50,000) / $50,000 = 0.2 or 20%. Therefore, the income elasticity of demand for housing is 6% / 20% = 0.3.

If the Average Household Income in Some Town Increased from $50,000