Income elasticity of demand measures the extent to which
A)the price of a good changes when there is a change in income.
B)the quantity demanded of a good changes when income changes.
C)real household income changes when there is a change in the price of a good.
D)one household's income changes when there is a change in the income of another household.
E)quantity demanded changes when there is a change in price.

Question

Quizplus · Accepted Answer

Income elasticity of demand measures the responsiveness, or sensitivity, of the quantity demanded of a good or service to a change in consumer income. It measures the percentage change in the quantity demanded of a good or service that results from a 1% change in income. Therefore, choice B is the correct answer as it describes the relationship between quantity demanded and income.

Income Elasticity of Demand Measures the Extent to Which