If the income elasticity for lobster is .6, a 25% increase in income will lead to a
A)6% drop in demand for lobster.
B)2.4% increase in demand for lobster.
C)15% increase in demand for lobster.
D)42% increase in demand for lobster.

Question

Quizplus · Accepted Answer

Income elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in consumer income. If the income elasticity for lobster is 0.6, it means that a 1% increase in income will result in a 0.6% increase in demand for lobster. Therefore, a 25% increase in income will lead to a 15% increase in demand for lobster (25 x 0.6 = 15). Thus, option C is the correct answer.

If the Income Elasticity for Lobster Is