If the income elasticity of demand for noodles is -2 and the percentage change in the quantity consumed is 5 percent,what is the percentage change in income?
A) 2.5 percent
B) 10 percent
C) -2.5 percent
D) -10 percent
E) -0.4 percent

Question

Quizplus · Accepted Answer

The income elasticity of demand is -2, which means that for every 1% increase in income, the quantity demanded for noodles decreases by 2%. The percentage change in the quantity consumed is 5%, so the percentage change in income is 5% / (-2) = -2.5%.

If the Income Elasticity of Demand for Noodles Is -2