Suppose the value of income elasticity of demand for a private college education is equal to 1.5. This means that
A) every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education
B) every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education
C) a 10 percent increase in income causes a 15 percent increase in the quantity of private college education purchased
D) a 15 percent increase in income causes a 10 percent increase in the quantity of private college education purchased
E) a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent

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 value of 1.5 indicating that a 10 percent increase in income leads to a 15 percent increase in the quantity demanded of the good, in this case, private college education.

Suppose the Value of Income Elasticity of Demand for a Private