Suppose income of the residents of a locality increases by $50$ % and the quantity of gel pens demanded increases by $20$ %. What is the income elasticity of demand for gel pens?

0.4

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0.6

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1.25

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1.50

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Solution

The correct option is A $0.4$
Income elasticity of demand $= \frac{p e r c e n t △ Q}{p e r c e n t △ Y}$ $= \frac{20}{50} = 0.4$ .

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Suppose income of the residents of a locality increases by 50% and the quantity of gel pens demanded increases by 20%. What is the income elasticity of demand for gel pens?

The correct option is A 0.4Income elasticity of demand =percent△Qpercent△Y =2050=0.4.

Suppose income of the residents of a locality increases by $50$ % and the quantity of gel pens demanded increases by $20$ %. What is the income elasticity of demand for gel pens?

The correct option is A $0.4$
Income elasticity of demand $= \frac{p e r c e n t △ Q}{p e r c e n t △ Y}$ $= \frac{20}{50} = 0.4$ .