Peter's monthly income increases from $1,500 to $1,600. As a result, he increases the number of DVDs he buys per month from 2 to 3. Peter's demand for DVDs is
A) price elastic.
B) price inelastic.
C) income elastic.
D) income inelastic.

Question

Quizplus · Accepted Answer

Peter's demand for DVDs is income elastic because the percentage increase in the quantity of DVDs he buys (50% increase from 2 to 3) is greater than the percentage increase in his income (6.67% increase from $1,500 to $1,600).

Peter's Monthly Income Increases from $1,500 to $1,600