Ray just got a raise,and decided to splurge on a fancy dinner to celebrate.The change to Ray's demand for fancy dinners could be captured by the:
A)price elasticity of supply.
B)price elasticity of demand.
C)cross-price elasticity.
D)income elasticity of demand.

Question

Quizplus · Accepted Answer

The change in Ray's demand for fancy dinners after getting a raise is related to his income, making it an example of income elasticity of demand. The increase in his income will increase his demand for fancy dinners, as fancy dinners are likely a normal good. Therefore, the correct choice is D, the income elasticity of demand.

Ray Just Got a Raise,and Decided to Splurge on a Fancy