Income Elasticity Interpret income elasticity of demand. Ashley received a raise at work that increased her monthly income from $1,000 to $1,250 (an increase of 25%). Last year, Ashley bought 20 slices of cake for her birthday party. With her increased income, she is able to buy 24 slices for her birthday this year (an increase of 20%). The income elasticity calculated using the formula for income elasticity is __________ and the cake slices are a __________ good. a.) 1.5; luxury b.) 0.5; normal c.) 0.8; normal d.) 1.25; luxury