You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would
A)be negative, and your roommate's would be positive.
B)be positive, and your roommate's would be negative.
C)be zero, and your roommate's would approach infinity.
D)approach infinity, and your roommate's would be zero.

Question

Quizplus · Accepted Answer

Income elasticity of demand measures how the quantity demanded of a good changes as consumer income changes. A positive income elasticity indicates that as income increases, demand for the good increases (normal good), while a negative income elasticity indicates that as income increases, demand for the good decreases (inferior good). In this scenario, you buy more Ramen noodles as your income increases, indicating a positive income elasticity for you. Your roommate buys fewer Ramen noodles in favor of other foods, indicating a negative income elasticity for your roommate.

You and Your College Roommate Eat Three Packages of Ramen