If a consumer increases her quantity of ice cream consumed by 100% when her income rises by 25%, then her income elasticity of demand for ice cream is
A)8.0
B)4.0
C)0.25
D)0.08

Question

Quizplus · Accepted Answer

The income elasticity of demand (Ey) is measured as the percentage change in quantity demanded (Qd) divided by the percentage change in income (Y).

Ey = (% change in Qd) / (% change in Y)

Here, the consumer increases her quantity of ice cream consumed by 100% (which we can write as 1.00) when her income rises by 25% (which we can write as 0.25).

Ey = 1.00 / 0.25 = 4.0

Therefore, the income elasticity of demand for ice cream is B) 4.0.

If a Consumer Increases Her Quantity of Ice Cream Consumed