Nicole's income elasticity of demand for hats is 1.5. All else equal, this means that if her income increases by 20 percent, she will buy
A) 150 percent more hats.
B) 50 percent more hats.
C) 30 percent more hats.
D) 20 percent more hats.

Question

Quizplus · Accepted Answer

The income elasticity of demand measures the percentage change in the quantity demanded of a good or service in response to a percentage change in income. In this case, Nicole's income elasticity of demand for hats is 1.5, which means that if her income increases by 20 percent, she will buy 30 percent more hats.

Nicole's Income Elasticity of Demand for Hats Is 1