This question was in my textbook: The average family in country A spends 60 perc

Question

This question was in my textbook:

The average family in country A spends 60 percent of their disposable income on residence.

The average family in country B spends 25 percent of their disposable income on residence.

The average monthly salary in country A is $2,500 and in country B is $7,500.

Assume that:

* aside from the difference in income between the families in the 2 countries, the families are identical

* the relationship between the price of residence and the price of other products are identical in the two countries

What is the demand flexibility to residence in relationship to income?

The answer given was 0.125

Please explain how they arrived at this answer. Thank you.

Explanation / Answer

When income is less demand flexibility is less. When income is higher demand flexibility is higher.

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