If the income elasticity for lobster is 0.4, a 40% increase in income will lead to a:
A)10% drop in demand for lobster.
B)16% increase in demand for lobster.
C)20% increase in demand for lobster.
D)4% increase in demand for lobster.

Question

Quizplus · Accepted Answer

Income elasticity of demand measures how much the quantity demanded of a good responds to a change in income. With an elasticity of 0.4, a 40% increase in income will lead to a 0.4 * 40% = 16% increase in demand for lobster.

If the Income Elasticity for Lobster Is 0