Question

It is believed that the income elasticity of food is very high for the poorest countries and much lower for the richer countries. As a country becomes more developed, the income elasticity of food will decline. Why is this largely true?

Answer 1

Income elasticity of demands tells about ratio of percentage change in quantity demanded to the percentage change in income.it tells about the change in consumer demand when there is change in income.

When we talk about poorest countries then their per capita income is very low while rich country have higher per capita income.poor country have lack of resources hence when consumer income is decrease then he will buy more giffen goods while if his income increases then he will buy normal goods.hence poor country's people have lower income in comparision of rich country .

While rich country's people does not have more effect if price of consumer goods is increases because they have higher resource .their earning is also higher .hence minor fluctuation can not impacted upon demand of consumer goods.

So when a country become more developed that means that country have resources to fulfilling their basic needs like -food,cloth and land.while poor country means where person's are incapable to get their basic needs even like -food,cloth,and land.

So because poor countries have low per capita income hence their will be high fluctuation in demand of consumer goods.