Question

If income increases by 10% and, in response, the quantity of housing demanded increases by 7%, then the income elasticity of demand for housing is A) -1. B) -0.7.

Answer 1

Answer:

the income elasticity of demand is 0.7

Explanation:

The computation of the income elasticity of demand is shown below:

As we know that

Income elasticity of demand is

= Percentage change in quantity demanded ÷ Percentage change in income

= 7 ÷ 10

= 0.7

hence, the income elasticity of demand is 0.7

The same is relevant