If a consumer doubles her quantity of ice cream consumed when her income rises by 25%,then her income elasticity of demand for ice cream is
A) 8.0.
B) 4.0.
C) .25.
D) .08.

Question

Quizplus · Accepted Answer

The income elasticity of demand (Ey) is calculated as the percentage change in quantity demanded divided by the percentage change in income.

Ey = (% change in quantity demanded) / (% change in income)

In this case, the consumer doubles her quantity of ice cream consumed, which is a 100% increase. The income increase is 25%.

Ey = (100% / 25%) = 4.0

Therefore, the answer is B) 4.0.

If a Consumer Doubles Her Quantity of Ice Cream Consumed