The income elasticity of demand is defined as the:
A) percentage change in the quantity demanded divided by the percentage change in the price level.
B) change in the quantity demanded divided by the change in per capita income.
C) percentage change in income divided by the percentage change in the quantity demanded.
D) change in per capita income divided by the change in the quantity demanded.
E) percentage change in the quantity demanded divided by the percentage change in per capita income.

Question

Quizplus · Accepted Answer

The income elasticity of demand measures the responsiveness of quantity demanded to changes in income. It is calculated by dividing the percentage change in quantity demanded by the percentage change in income. Hence, option E is the correct choice as it describes the calculation of the income elasticity of demand.

The Income Elasticity of Demand Is Defined as The