The income elasticity of demand for low-quality beef is -2. Thus, a 5% increase in the quantity of low-quality beef demanded
A) is the result of a decrease in income of 2.5%.
B) is the result of a decrease in income of 10%.
C) is the result of an increase in income of 2.5%.
D) is unrelated to any change in income.

Question

Quizplus · Accepted Answer

The income elasticity of demand for low-quality beef is -2, which means that a 1% increase in income will lead to a 2% decrease in the quantity of low-quality beef demanded. Therefore, a 5% increase in the quantity of low-quality beef demanded must be the result of a decrease in income of 2.5%.

The Income Elasticity of Demand for Low-Quality Beef Is -2