If the income elasticity of demand for noodles is -2 and the percentage change in the quantity consumed is 5%, what is the percentage change in income?
A) 2.5%
B) 10%
C) -2.5%
D) -10%
E) -0.4%

Question

Quizplus · Accepted Answer

Income elasticity of demand is the percentage change in quantity demanded divided by the percentage change in income. 
Income elasticity of demand = (% change in quantity demanded) / (% change in income) 
Given, income elasticity of demand = -2, and % change in quantity consumed = 5% 
Therefore, -2 = (5%)/(% change in income) 
Solving for % change in income, we get % change in income = -2.5% 
Hence, option C is the correct answer.

If the Income Elasticity of Demand for Noodles Is -2