If the income elasticity of demand for a good is 0.75,a 25% increase in income results in
A)an 18.75% increase in quantity demanded.
B)a 3% increase in quantity demanded.
C)a 0.1875% increase in quantity demanded.
D)a 3% decrease in quantity demanded.
E)There is not enough information to answer.

Question

Quizplus · Accepted Answer

Income elasticity of demand measures the change in quantity demanded of a good in response to a change in consumers' income. If the income elasticity of demand for a good is 0.75, a 25% increase in income will result in a 0.75 x 25% = 18.75% increase in quantity demanded. Therefore, option A is the correct answer.

If the Income Elasticity of Demand for a Good Is