High School

Dear beloved readers, welcome to our website! We hope your visit here brings you valuable insights and meaningful inspiration. Thank you for taking the time to stop by and explore the content we've prepared for you.
------------------------------------------------ If a consumer doubles her quantity of ice cream consumed when her income rises by 25%, then her income elasticity of demand for ice cream is:

a) 0.08
b) 4.00
c) 8.00
d) 0.25

Answer :

Final answer:

The income elasticity of demand for ice cream when the consumer doubles their consumption as income rises by 25% is 4.00. Therefore, the correct answer is b) 4.00.

Explanation:

If a consumer doubles her quantity of ice cream consumed when her income rises by 25%, then her income elasticity of demand for ice cream is calculated by dividing the percentage change in quantity demanded by the percentage change in income. Using the formula:

Income Elasticity of Demand = (% change in quantity demanded) / (% change in income)

In this case, the quantity of ice cream consumed has doubled, which is a 100% increase. The income has increased by 25%. Plugging these numbers into the formula gives us:

Income Elasticity of Demand = (100%) / (25%) = 4.00

Therefore, the correct answer is b) 4.00.