Assume that All's income increased by 25% and his consumption of milk increases by 50% Which of the following statements is true? A. Income elasticity is equal to 0.5 and milk is a normal good. B. Income elasticity is equal to 0.5 and milk is an inferior good. C. Income elasticity is equal to 2 and milk is a normal good. D. Income elasticity is equal to 2 and milk is an inferior good.

To determine the correct statement, we need to calculate the income elasticity of demand for milk using the given information.Income elasticity of demand is calculated using the formula: Given:- All's income increased by (0.25).- His consumption of milk increased by (0.50).Plugging these values into the formula: Now, let's interpret the elasticity value:- If the elasticity is greater than 1, the good is a normal good.- If the elasticity is less than 1, the good is an inferior good.Since the calculated elasticity is 2, which is greater than 1, milk is a normal good.Therefore, the correct statement is:C. Income elasticity is equal to 2 and milk is a normal good.