A 10 percent increase in income increases the quantity of apple juice demanded from 18,800 to 21,200 gallons. The income elasticity of demand for apple juice is
A) 0.5.
B) 0.8.
C) 1.0.
D) 1.2.

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. The percentage change in quantity demanded is ((21,200 - 18,800) / 18,800) * 100 = 12.77%. The percentage change in income is 10%. Therefore, the income elasticity of demand is 12.77% / 10% = 1.277, which rounds to 1.2.

A 10 Percent Increase in Income Increases the Quantity of Apple