If a 5% increase in income increases quantity demanded by 4%, the income elasticity of demand is:
A) 1.25.
B) 0.80.
C) 2.0.
D) 0.02.

Name: If a 5% increase in income increases quantity demanded by 4%, the income elasticity of demand is: A) 1.25. B) 0.80. C) 2.0. D) 0.02.
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Question

Quizplus · Accepted Answer

The income elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in income. Here, it is 4% / 5% = 0.80.

If a 5% Increase in Income Increases Quantity Demanded by 4