If Mr.Brown's income increases by 12 percent and his quantity demanded of music downloads increases by 4 percent,Mr.Brown's income elasticity of demand for music downloads is
A)3.0.
B)0.33.
C)-0.33.
D)-3.0.
E)48.0.

Question

Quizplus · Accepted Answer

The income elasticity of demand can be calculated using the formula:
% Change in quantity demanded / % Change in income

% Change in income = 12%
% Change in quantity demanded = 4%

Therefore, income elasticity of demand = 4%/12% = 0.33.
Since it is positive, the music downloads are a normal good. Therefore, the best choice is B.

If MrBrown's Income Increases by 12 Percent and His Quantity Demanded