If the income elasticity of demand for a service is 0.6, then a 5 percent increase in income will generate a __________ in quantity demanded
A)3 percent decrease
B)3 percent increase
C)8.33 percent decrease
D)8.33 percent increase
E)0.12 percent decrease

Question

Quizplus · Accepted Answer

Income elasticity of demand measures how much the quantity demanded of a good responds to a change in consumers' income. With an elasticity of 0.6, a 5% increase in income will lead to a 3% increase in quantity demanded (0.6 * 5% = 3%).

If the Income Elasticity of Demand for a Service Is