If the income-elasticity coefficient for coffee is 0.5, the demand for coffee will ________.

Question

Quizplus · Accepted Answer

An income-elasticity coefficient of 0.5 means that, for every 1% increase in income, the quantity demanded of coffee will increase by 0.5%. Therefore, choice C is correct. Option A is incorrect because the demand for coffee would increase, not decrease. Option B is incorrect because it indicates a 1% increase in quantity for every 5% increase in income, whereas the coefficient implies only a 0.5% increase in quantity for a 1% increase in income. Finally, option D is incorrect because the coefficient is greater than zero, indicating that there is a positive relationship between coffee demand and income, making it not neutral.

If the Income-Elasticity Coefficient for Coffee Is 0