An income elasticity of demand for milk of 0.1 could mean that
A) as income rises by 10 percent, quantity demanded rises by 1 percent.
B) as income rises by 100 percent, quantity demanded rises by 1 percent.
C) as income rises by 20 percent, quantity demanded rises by 10 percent.
D) as income rises by 50 percent, quantity demanded rises by 25 percent.

Question

An income elasticity of demand for milk of 0.1 could mean that
A) as income rises by 10 percent, quantity demanded rises by 1 percent.
B) as income rises by 100 percent, quantity demanded rises by 1 percent.
C) as income rises by 20 percent, quantity demanded rises by 10 percent. 
D) as income rises by 50 percent, quantity demanded rises by 25 percent.

Quizplus · Accepted Answer

An income elasticity of demand for milk of 0.1 means that for every 1 percent increase in income, quantity demanded for milk will only increase by 0.1 percent. Therefore, if income rises by 10 percent, quantity demanded will rise by 1 percent (10 x 0.1 = 1).

An Income Elasticity of Demand for Milk of 0