The income elasticity of demand for calculators is 0.2. A 5% increase in income will cause:
A) a 25% increase in the quantity demanded of calculators
B) a 1% increase in the quantity demanded of calculators
C) a 25% decrease in the quantity demanded of calculators
D) a 10% increase in the quantity demanded of calculators

Question

Quizplus · Accepted Answer

The income elasticity of demand is 0.2, meaning a 1% increase in income results in a 0.2% increase in demand. Therefore, a 5% increase in income will cause a 1% increase in demand (5% * 0.2 = 1%).

The Income Elasticity of Demand for Calculators Is 0