The income elasticity of demand for ground beef has been estimated to be -0.197.If income drops by 10 percent in a period, how will that affect demand for ground beef in that period, all other things unchanged?
A) demand will increase by less than 1.97 percent
B) demand will increase by 1.97 percent
C) demand will decrease
D) demand won't change, but quantity demanded will decrease by 1.97 percent

Question

Quizplus · Accepted Answer

The income elasticity of demand is -0.197, indicating that ground beef is an inferior good. A 10% decrease in income will lead to a 1.97% increase in demand, calculated as -0.197 * (-10%).

The Income Elasticity of Demand for Ground Beef Has Been