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    The income elasticity of demand for fresh potatoes has been estimated to be -0.32. This means that the demand for fresh potatoes will
    A) fall by 3.2% if incomes rise by 10%
    B) rise by 3.2% if incomes rise by 10%
    C) fall by 3.2% if price rises by 10%
    D) rise by 3.2% if the price rises by 10%
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    Sorry you've not had any responses about this. Are you sure you've posted in the right place? Here's a link to our subject forum which should help get you more responses if you post there.


    Just quoting in Danny Dorito so she can move the thread if needed :wizard:
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    (Original post by hbos14)
    The income elasticity of demand for fresh potatoes has been estimated to be -0.32. This means that the demand for fresh potatoes will
    A) fall by 3.2% if incomes rise by 10%
    B) rise by 3.2% if incomes rise by 10%
    C) fall by 3.2% if price rises by 10%
    D) rise by 3.2% if the price rises by 10%
    YED is the % change in quantity demanded divided by the % change in income, so it is the gradient of the demand curve when the axes are income against quantity. Negative YED means the potatoes are an inferior good. You could just calculate the YED for each one and see which one is correct,

    For B \frac{\%\Delta QD}{\%\Delta Y} = \frac{3.2}{10} = 0.32, well that's not it, so do the same for the other options and find the one that has a YED of -0.32.
 
 
 
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