If Mary always spends 10% of her income on records, regardless of the prices of records or other goods, then:
A)Mary could not be a utility maximizer.
B)records are inferior goods.
C)Mary's income elasticity of demand for records is one.
D)records are abnormal goods.

Question

Quizplus · Accepted Answer

Mary's spending on records is a fixed percentage of her income, which means her income elasticity of demand for records is always one. This means that if her income were to increase 10%, she would increase her spending on records by 10%, keeping her spending ratio constant. Therefore, option C is correct. Options A, B, and D are incorrect as they do not make sense in the context of the given information.

If Mary Always Spends 10% of Her Income on Records