If a 8 percent increase in income results in a 10 percent increase in the quantity demanded of lattes,what is the income elasticity of demand for lattes,and what type of good is lattes
A)negative, and therefore lattes is an normal good
B)negative, and therefore lattes is an inferior good
C)positive, and therefore lattes is an inferior good
D)positive, and therefore lattes is a normal good

Question

Quizplus · Accepted Answer

The income elasticity of demand is calculated by dividing the percent change in quantity demanded by the percent change in income. In this case, the income elasticity of demand for lattes would be (10%/8%) = 1.25. Since this value is positive, lattes is a normal good.

If a 8 Percent Increase in Income Results in a 10