If income elasticity of demand for food is 1.55 it follows that
A)a 10 percent rise in the price of food lowers the quantity demanded of food by 15.5 percent.
B)if income rises by 10 percent,consumption of food rises by 15.5 percent.
C)if income rises by 10 percent,consumption of food falls by 15.5 percent.
D)a 1 percent rise in the price of food decreases the quantity demanded of food by 1.55 percent.
E)none of the above

Question

Quizplus · Accepted Answer

Income elasticity of demand measures the responsiveness of demand for a good to a change in income. If the value of income elasticity is positive, it means that as income increases, the quantity demanded of the good also increases. The exact percentage change in demand can be determined by the value of income elasticity. In this case, the value is 1.55, which means that a 10 percent increase in income will lead to a 15.5 percent increase in demand for food. Therefore, option B is the correct choice.

If Income Elasticity of Demand for Food Is 1