The income elasticity of demand for ground beef has been estimated to be -0.197.If income falls by 20 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 almost 4 percent
C) demand will decrease by almost 4 percent
D) demand won't change, but quantity demanded will increase.

Question

Quizplus · Accepted Answer

The income elasticity of demand is -0.197, indicating that ground beef is an inferior good. A 20% decrease in income will increase demand by 0.197 * 20% = 3.94%, which is almost 4%.

The Income Elasticity of Demand for Ground Beef Has Been