Does anybody have an idea of how to work this out? The ans is D, but I dont understand how? A consumer always spends one quarter of his income on travel. What are his price elasticity of demand for travel and his income elasticity of demand for travel respectively: A 1 and 0.25. B 0 and 0.25. C 1 and 0. D 0 and 1.
I'm afraid that the answer given in the Examiners' Report is wrong. The correct answer is e = -1, e Y = +1 (though this isn't offered). Does this make sense now?
