Question

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is _______.

Answer 1

1.5

Elastic

Step-by-step explanation:

Income elasticity of demand measures the responsiveness of quantity demanded to changes in income.

Income elasticity of demand = percentage change in quantity demanded / percentage change in income.

6 / 4 = 1.5

The income elasticity of demand is elastic

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