Question

3. If the income elasticity for lobster is 0.3 , a -2.3 percent change in income will lead to a ______percentage change in quantity demanded for lobster :

Round your answers to two decimal places. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. If the answer is -10.5% (-10.5% = -.105) input -10.5

Answer 1

Income elasticity is percentage change in quantity demanded of a product owing to percentage change in income of consumer.

It can be calculated as:

Income elasticity = % change in quantity demanded / % change in income

We have income elasticity as 0.3 and % change in income as -2.3%.

0.3 = % change in quantity demanded / -2.3%

0.3*(-2.3) = % change in quantity demanded

% change in quantity demanded = -0.69%

So, -2.3 percent change in income will lead to -0.69 percentage change in quantity demanded for lobster.