If the income elasticity of demand for some good is 2.4,a 10% increase in income results in
A)a 24% increase in the quantity demanded.
B)a 2.4% increase in the quantity demanded.
C)a 240% increase in the quantity demanded.
D)a 24% decrease in quantity demanded.
E)a 240% decrease in quantity demanded.

Question

Quizplus · Accepted Answer

Income elasticity of demand measures the responsiveness of quantity demanded to changes in income, and it is calculated as the percentage change in quantity demanded divided by the percentage change in income. In this case, the income elasticity of demand is 2.4, which means that a 1% increase in income will lead to a 2.4% increase in the quantity demanded. Therefore, a 10% increase in income will result in a 24% increase in the quantity demanded (10% x 2.4 = 24%). Thus, the correct answer is A.

If the Income Elasticity of Demand for Some Good Is