If the quantity demanded of restaurant meals increases by 20% when income increases by 10%, the demand for restaurant meals is
A) price sensitive.
B) income-inelastic.
C) income-elastic.
D) price insensitive.

Question

Quizplus · Accepted Answer

If the percentage change in quantity demanded is greater than the percentage change in income, then the good is said to be income-elastic. In this scenario, since the quantity demanded of restaurant meals increases by 20% when income increases by 10%, the demand for restaurant meals is said to be income-elastic. This means that an increase in income causes a more than proportionate increase in the demand for restaurant meals, indicating that they are a luxury good.

If the Quantity Demanded of Restaurant Meals Increases by 20