Answer to Question #221317 in Microeconomics for Lebogang

Question

If Shelly's income increases by 10% and at the same time there is a 2% decrease in her quantity demanded of potatoes, the income elasticity is

A. 0,5
B. -5
C. -0,2
D. 2

Answer 1

Income elasticity$=\frac{\%\Delta in\space quantity}{\%\Delta\space in\space income}$

$=\frac{-2}{10}\\=-0.2$

CORRECT ANSWER: C. -0,2