Q7
Income elasticity of demand is defined as the responsiveness of
A.
Quantity demanded to a change in income
AnswerB.
Quantity demanded to a change in price
C.
Price to a change in income
D.
Income to a change in quantity demanded
Answer: Option A
Solution
Answer: Option A
Solution:
Income Elasticity of Demand (YED) is defined as the responsiveness of demand when a consumer's income changes. It is defined as the ratio of the change in quantity demand over the change in income. The higher the income elasticity, the more sensitive demand for a good is to changes in income.