The Smith family buys much more macaroni when someone in the family is laid off. This means that the Smiths' ____ is negative.
A) demand curve for macaroni
B) income elasticity for macaroni
C) Engel's law
D) income
E) price elasticity of demand for macaroni

Question

Quizplus · Accepted Answer

Income elasticity measures the percentage change in the quantity demanded of a good in response to a percentage change in income. In this scenario, when someone in the Smith family is laid off, their income decreases and their demand for macaroni increases, indicating a positive income elasticity. Therefore, the opposite holds true, making the Smiths' income elasticity for macaroni negative.

The Smith Family Buys Much More Macaroni When Someone in the Family