Edgar only consumes protein shakes with his income, I. The price of shakes is p
a. What is Edgar's demand equation for shakes?
b. Can protein shakes be an inferior good for Edgar? Explain.
c. What is the price elasticity of Edgar's demand for shakes? Derive using calculus.
d. What is the income elasticity of Edgar's demand for shakes?
a. Q = I/p
b. No, as income rises, Edgar will purchase more of the only good he consumes, making shakes a normal good. Also, recall that the weighted sum of income elasticities must sum to 1.
c. With calculus, dQ/dp = -I/p2. Ed= -1.
d. With calculus, dQ/dI = 1/p. Ei = 1. In words, if Edgar's income doubles, he will double his consumption of protein shakes.
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