question archive The income elasticity of demand for a good is 0
The income elasticity of demand for a good is 0
Subject:EconomicsPrice:2.88 Bought3
The income elasticity of demand for a good is 0.5. If demand decreased 5% as a result of a decrease in income, how much must income have declined?
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The percentage change in quantity demanded is the percentage change in income times the income elasticity, i.e.,
- -5% = 0.5 * percentage change in income
- percentage change income = -10%
That is, income must have declined by 10%.
