If an individual's housing purchases are always a constant fraction of income,then the income elasticity of demand for housing is
A)greater than one.
B)equal to one.
C)less than one.
D)Cannot be determined from the available information.

Question

Quizplus · Accepted Answer

The income elasticity of demand measures how much the quantity demanded of a good responds to a change in income. If an individual's housing purchases are always a constant fraction of income, it means that if income increases by a certain percentage, the amount spent on housing will also increase by the same percentage. This behavior indicates a unitary income elasticity of demand, where the percentage change in quantity demanded is equal to the percentage change in income, hence the elasticity is equal to one.

If an Individual's Housing Purchases Are Always a Constant Fraction