Suppose Empirical Analysis Concludes That the Income Elasticity of Demand

question 153

Multiple Choice

Suppose empirical analysis concludes that the income elasticity of demand for Kraft Dinner (KD) is -0.2.The interpretation of this result is that

• A)a 10% increase in income will lead to a 2% decrease in quantity demanded of KD.
• B)a 10% increase in income will lead to a 20% decrease in quantity demanded of KD.
• C)a 10% increase in income will lead to a 0.2% decrease in quantity demanded of KD.
• D)a 10% increase in income will lead to a 2% increase in quantity demanded of KD.
• E)a 10% increase in income will lead to a 20% increase in quantity demanded of KD.

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