The income elasticity of demand for ground beef has been estimated to be -0.197.If income falls by 10 percent in a period, how will that affect total expenditures on ground beef in that period, all other things unchanged?
A) total expenditures will rise
B) total expenditures will remain unchanged
C) total expenditures will fall
D) not enough information is given to answer the question

Question

Quizplus · Accepted Answer

Given the income elasticity of demand for ground beef is -0.197, a 10 percent fall in income would lead to an increase in demand for ground beef (since it's an inferior good indicated by the negative elasticity). This increase in demand, all other things being equal, would lead to an increase in total expenditures on ground beef.

The Income Elasticity of Demand for Ground Beef Has Been