A 2015 report by the music industry estimated the revenue lost to the industry every year from illegal downloading. In this problem we will derive some of the estimates that may have gone into their calculation (approximately).

First, start with the individual consumer's problem. Suppose a typical consumer has a yearly entertainment budget of I that they can allocate between music downloads (D) and other forms of entertainment (E). Consumer preferences are characterized by a utility function U(D, E).

Suppose the solution to the consumer's optimization problem yields an individual demand curve of Q^D = I^0.5 P^_D-0.7

(c) Calculate the consumer's income elasticity of demand for music downloads.