Suppose European incomes increase by 4 percent per year,and as a result,U.S.exports of farm goods to Europe rise by 1 percent per year.The income elasticity that can be computed from this information is
A)0.25.
B)4.0.
C)0.5.
D)2.0.

Question

Quizplus · Accepted Answer

The income elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in income. Here, it is 1% / 4% = 0.25.

Suppose European Incomes Increase by 4 Percent Per Year,and as a Result,U.S.exports