HomeQuestionsEconomicsElasticity of Demand and Taxation
📚 Learning Guide
Elasticity of Demand and Taxation
easy

What is the income elasticity of demand for a normal good when a 10% increase in income results in a 15% increase in quantity demanded?

Master this concept with our detailed explanation and step-by-step learning approach

Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

67

B

5

C

0

D

5

Understanding the Answer

Let's break down why this is correct

Answer

Income elasticity of demand measures how much the quantity demanded of a good changes when people's income changes. In this case, when income increases by 10%, the quantity demanded increases by 15%. To find the income elasticity, we divide the percentage change in quantity demanded by the percentage change in income. So, we take 15% and divide it by 10%, which gives us an elasticity of 1. 5.

Detailed Explanation

The income elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in income. Other options are incorrect because This answer suggests a misunderstanding of the calculation; This answer implies that demand does not change with income.

Key Concepts

Income elasticity of demand
Topic

Elasticity of Demand and Taxation

Difficulty

easy level question

Cognitive Level

understand

Ready to Master More Topics?

Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.

Start Learning with SeekhExplore More Elasticity of Demand and Taxation Questions