If a 5 percent increase in consumer incomes leads to a 10 percent increase in the quantity demanded for a good, the good is a(n)_________ good with an income elasticity of________ .
A)normal; 2.0
B)inferior; - 0.50
C)inferior ; 2.0
D)normal; 0.50

Question

Quizplus · Accepted Answer

A 5% increase in consumer incomes leads to a 10% increase in the quantity demanded for the good, indicating that the good is a normal good, as the demand for the good increases with an increase in income. The income elasticity of demand can be calculated as the percentage change in quantity demanded divided by the percentage change in income, which is 10%/5% = 2.0. Therefore, the answer is (A) normal; 2.0.

If a 5 Percent Increase in Consumer Incomes Leads to a 10