Stating that income elasticity of demand for potatoes equals 0.15 is equivalent to stating that if income
A)decreases by 10 percent,potato purchases decrease by 1.5 percent.
B)increases by 10 percent,potato purchases increase by 15 percent.
C)decreases by 1.5 percent,potato purchases decrease by 10 percent.
D)increases by 15 percent,potato purchases decrease by 10 percent.
E)none of the above

Question

Quizplus · Accepted Answer

Income elasticity of demand of 0.15 means that for every 1% change in income, the quantity demanded changes by 0.15%. Therefore, a 10% decrease in income would lead to a 1.5% decrease in potato purchases.

Stating That Income Elasticity of Demand for Potatoes Equals 0