this is the market for good Y the income elasticity for good Y is 0.5. what happens if the incomes of cosumers of good Y increase
If the income elasticity for good Y is 0.5, it means that it is a normal good but not a luxury good. A positive income elasticity suggests that as consumers' incomes increase, the demand for good Y will also increase, but at a slower rate than the increase in income.
Therefore, if the incomes of consumers of good Y increase:
1. The demand for good Y will increase, indicating a rightward shift in the demand curve for good Y.
2. The extent of the increase in demand will be less than the increase in income, as the income elasticity is less than 1.
3. The magnitude of the change in quantity demanded will be half of the change in income.
In summary, the increase in incomes of consumers of good Y will lead to an increase in the demand for good Y, but the magnitude of the increase in demand will be relatively smaller compared to the increase in income.