Suppose when the consumer's income rises by 100%,the consumer's consumption of good only increases by 1%.We can infer that the consumer's income elasticity for good is
A) -0.01
B) -1
C) 0.01
D) 1

Question

Suppose when the consumer's income rises by 100%,the consumer's consumption of good  only increases by 1%.We can infer that the consumer's income elasticity for good  is
A) -0.01 
B) -1 
C) 0.01 
D) 1

Quizplus · Accepted Answer

The income elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in consumer income.

In this case, the income elasticity of demand for good 11ea71e2_630f_0eaf_89cd_23655f9b8be8_TB1644_11 is:

Income elasticity of demand = (% change in quantity demanded) / (% change in income)

In this case, we are given that when the consumer's income rises by 100%, the consumer's consumption of good 11ea71e2_630f_0eaf_89cd_23655f9b8be8_TB1644_11 only increases by 1%.

So, the income elasticity of demand can be calculated as follows:

Income elasticity of demand = (1%/100%) = 0.01

Therefore, the answer is C) 0.01

Suppose When the Consumer's Income Rises by 100%,the Consumer's Consumption