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JAMB Economics 1997 Question 18

Question 18

Elasticity

If the percentage change in the income of the consumers of an industrial product is less than the resulting percentage change in the quantity demanded of the product, then the income elasticity of demand for the product is

  1. A.less than one
  2. B.equal to one
  3. C.greater than one
  4. D.equal to zero.
Show the answer and explanation

Answer: C (greater than one)

Explanation

Income elasticity = % change in quantity demanded ÷ % change in income. If quantity changes by a bigger percentage than income, the result is greater than one.