Suppose that Seth's income increases from $400 to $500 per week, so Seth increases his purchases of movies from 3 to 4. The income elasticity of movies is:

Question

Quizplus · Accepted Answer

The income elasticity of movies is calculated by the percent change in the quantity of movies purchased divided by the percent change in income. In this case, the percent change in quantity is:

(4-3)/3 = 0.33

And the percent change in income is:

(500-400)/400 = 0.25

So the income elasticity of movies is:

0.33/0.25 = 1.33

Therefore, the correct answer is A) 1.33.

Suppose That Seth's Income Increases from $400 to $500 Per