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

Question

Quizplus · Accepted Answer

The income elasticity of demand (Ey) is the percentage change in quantity demanded of a good or service divided by the percentage change in income. Mathematically,

Ey = (%ΔQd)/(%ΔY).

From the given information, we know that when income rises by 100%, the consumer's consumption of good X falls by 1%. Therefore,

%ΔQd = -1%

and

%ΔY = 100%.

Substituting these values in the formula for income elasticity, we get

Ey = -1%/100% = -0.01.

Therefore, the correct answer is B, i.e., -0.01.

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

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