Question

The income elasticity of demand for low quality beef is 2 Thus an 8 decrease in the quantity of low quality beef demanded A is the result of a decrease in income of 4 B is the result of an increase in income of 0.25 C is the result of an increase in income of 4 D is unrelated to any change in income

Answer 1

Answer: C is the result of an increase in income of 4

Explanation:

When the income elasticity of a good is negative, it means that it is an inferior good because inferior goods see their quantity demanded fall when income rises and vice versa.

In this case therefore, the income must have risen for the quantity demanded to decrease.

Income = Quantity demanded / Income elasticity

= -8 / -2

= 4

Income therefore increased by 4.