Which of the following tends to be true of the income elasticity of demand for food?
A)It tends to be well below unity only at low levels of income.
B)It tends to be well above unity only at high levels of income.
C)At low levels of income,it tends to be fairly high; but as the level of income rises,it tends to fall.
D)It tends to remain fairly constant at all levels of income.
E)It is usually zero,since we can only eat so much.

Question

Quizplus · Accepted Answer

At low levels of income, food tends to be a significant portion of a household's budget, and therefore, income elasticity of demand for food tends to be relatively high. However, as income increases, food becomes a smaller portion of the budget, resulting in a decrease in income elasticity of demand for food. Therefore, choice C is the most accurate statement about the income elasticity of demand for food.

Which of the Following Tends to Be True of the Income