The income elasticity of demand for eggs has been estimated to be 0.57.If income grows by 5% in a period,all other things unchanged,demand will:
A)increase by more than 5.7%.
B)increase by about 2.9%.
C)decrease by more than 5.7%.
D)decrease by less than 5.7%.

Question

Quizplus · Accepted Answer

The income elasticity of demand for eggs is 0.57, which means that for a 1% increase in income, demand for eggs increases by 0.57%. If income grows by 5%, demand for eggs will increase by 5% x 0.57 = 2.85%, or about 2.9%. Therefore, the correct answer is B.

The Income Elasticity of Demand for Eggs Has Been Estimated