Assume that a six percent increase in income results in a three percent increase in the quantity demanded of a good.What is the income elasticity of demand for the good,and what type of good is it
A)negative, and therefore the good is an inferior good
B)negative, and therefore the good is a normal good
C)positive, and therefore the good is a normal good
D)positive, and therefore the good is an inferior good

Question

Quizplus · Accepted Answer

The income elasticity of demand measures the responsiveness of the quantity demanded to changes in income. A positive income elasticity of demand means that as income increases, the quantity demanded of the good also increases, indicating that it is a normal good. Since a six percent increase in income results in a three percent increase in the quantity demanded of the good, the income elasticity of demand is 0.5, which is positive. Therefore, the correct answer is C.

Assume That a Six Percent Increase in Income Results in a Three