Question

If a 10 percent increase in income induced a group of consumers to reduce their yearly purchases of eggs by 5 percent, for these consumers, Group of answer choices the income elasticity of eggs equals approximately 1.05. the income elasticity of eggs is 0.5. eggs are a luxury good. eggs are an inferior good.

Answer 1

the income elasticity of eggs is 0.5.

Step-by-step explanation:

Inferior goods are goods whose demand falls when income rises and increases when income falls.

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

income elasticity = percentage change in quantity demanded / percentage change in income

5/10 = 0.5

If the absolute value of income elasticity of demand is greater than one, it means demand is elastic.

If the absolute value of income elasticity of demand is less than one, it means demand is inelastic.