When income increases by 6 percent,the demand for potatoes decreases by 2 percent.The income elasticity of demand for potatoes equals
A) -2.00.
B) 3.00.
C) -3.00.
D) 0.33.
E) -0.33.

Question

Quizplus · Accepted Answer

The income elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in income. Here, it is (-2% / 6%) = -1/3 or -0.33.

When Income Increases by 6 Percent,the Demand for Potatoes Decreases