Ashley recently got a 15 percent raise. She now purchases 7.5 percent more coffee. Ashley's income elasticity for coffee is

A) 0.5.
B) 0.75.
C) 1.5
D) 2.

Question

Ashley recently got a 15 percent raise. She now purchases 7.5 percent more coffee. Ashley's income elasticity for coffee isA)  0.5.B)  0.75.C)  1.5D)  2.

Andres Artola · Accepted Answer

Final Answer : A, Explanation :  Income elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in income. Here, it's 7.5% / 15% = 0.5.

Ashley recently got a 15 percent raise. She now purchases 7.5 percent more coffee. Ashley's income elasticity for coffee is

A) 0.5.
B) 0.75.
C) 1.5
D) 2.

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