The income elasticity of demand for education is 3.5. Thus, a 4% increase in income will
A) decrease the quantity of education demanded by 3.5%.
B) decrease the quantity of education demanded by 14%.
C) increase the quantity of education demanded by 4%.
D) increase the quantity of education demanded by 14%.

Question

Quizplus · Accepted Answer

The income elasticity of demand measures how the quantity demanded of a good responds to a change in income, with a positive elasticity indicating that the good is a normal good (demand increases as income increases). Here, with an elasticity of 3.5, a 4% increase in income leads to a 3.5 * 4% = 14% increase in the quantity of education demanded.

The Income Elasticity of Demand for Education Is 3