If income elasticity of demand for food is 1.75 it follows that
A) a 10 percent rise in the price of food lowers the quantity demanded of food by 17.5 percent.
B) if income rises by 10 percent, consumption of food rises by 17.5 percent.
C) if income rises by 10 percent, consumption of food falls by 17.5 percent.
D) a 1 percent rise in the price of food decreases the quantity demanded of food by 1.75 percent.
E) none of the above

Question

Quizplus · Accepted Answer

Income elasticity of demand measures the percentage change in the quantity demanded of a good due to a 1 percent change in income. A positive income elasticity indicates that the good is a normal good (as income rises, demand rises). A value of 1.75 means that if income rises by 10 percent, then the quantity demanded of food increases by 1.75 times 10 percent, or 17.5 percent.

If Income Elasticity of Demand for Food Is 1