Suppose the income elasticity of demand for basketballs is 1.20.A 3 percent increase in the price of basketballs will result in
A)a 3.6 percent decrease in the quantity of basketballs demanded.
B)a 3.6 percent increase in the quantity of basketballs demanded.
C)a 4 percent decrease in the number of basketballs demanded.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

Income elasticity of demand measures the responsiveness of quantity demanded to a change in income, not price. Therefore, the given income elasticity of demand does not directly relate to the effect of a price change.

Suppose the Income Elasticity of Demand for Basketballs Is 1