Heath's income elasticity of demand for concerts is 2.All else equal,this means that if his income increases by 10 percent,he will purchase tickets for
A)2 percent more concerts.
B)5 percent more concerts.
C)10 percent more concerts.
D)20 percent more concerts.

Question

Quizplus · Accepted Answer

Since the income elasticity of demand is 2, Heath's demand for concerts is elastic. This means that his quantity demanded will respond strongly to changes in income. Specifically, for every 1% increase in his income, his demand for concerts will increase by 2%. Therefore, if his income increases by 10%, his demand for concerts will increase by 20%, or in other words, he will purchase tickets for 20% more concerts. Thus, the correct answer is D.

Heath's Income Elasticity of Demand for Concerts Is 2