Suppose the income elasticity of demand for used jet skis is 3.5.If the level of income decreases by 1 percent,the number of used jet skis sold will,ceteris paribus,
A)Rise by 0.29 percent.
B)Rise by 3.5 percent.
C)Fall by 0.29 percent.
D)Fall by 3.5 percent.

Question

Quizplus · Accepted Answer

A positive income elasticity of demand for used jet skis suggests that they are normal goods. A decrease in income will lead to a decrease in demand for used jet skis. The magnitude of this decrease can be calculated as follows:
%ΔQd = Eₑ(%ΔY)
%ΔQd = 3.5(-1)
%ΔQd = -3.5
Therefore, the number of used jet skis sold will fall by 3.5 percent. 
The correct answer is D.

Suppose the Income Elasticity of Demand for Used Jet Skis