The income elasticity of demand for a food is unity.A consumer's monthly income is $2,000,of which 20 percent is spent on food.If income doubles,the amount spent on food will be:
A) $400 per month.
B) $500 per month.
C) $800 per month.
D) $1,000 per month.

Question

Quizplus · Accepted Answer

If the income elasticity of demand for food is unity, it means that a 1% increase in income will result in a 1% increase in the quantity of food demanded.

In this case, the consumer's monthly income is $2,000, and 20% of that is spent on food. Therefore, the amount spent on food is $2,000 x 0.2 = $400 per month.

If the income doubles, the new monthly income will be $4,000. Using the income elasticity of demand, we can calculate that the new amount spent on food will be $400 x 2 = $800 per month.

Therefore, the correct answer is C, $800 per month.

The Income Elasticity of Demand for a Food Is Unity