If income elasticity of demand is 2.12, it means that quantity demanded will __________ by 2.12 percent for every __________ percent __________ in income.
A)rise; 2.12; fall
B)rise; 1.0; rise
C)fall; 1.0; rise
D)fall; 2.12; fall
E)none of the above

Question

Quizplus · Accepted Answer

Income elasticity of demand measures how much the quantity demanded of a good responds to a change in consumers' income. A positive elasticity (greater than 1) indicates that the good is a normal good and that its demand increases more than proportionally as income rises. Therefore, if the income elasticity of demand is 2.12, it means that for every 1 percent increase in income, the quantity demanded will rise by 2.12 percent.

If Income Elasticity of Demand Is 2