The correct answer is A.
Income elasticity of demand is a measure of how responsive the demand for a good or service is to changes in income. It is calculated by dividing the percentage change in the quantity demanded of a good or service by the percentage change in income.
The formula for income elasticity of demand is:
$$\text{Income elasticity of demand} = \frac{\%\Delta q}{\%\Delta y}$$
where:
- $\%\Delta q$ is the percentage change in the quantity demanded
- $\%\Delta y$ is the percentage change in income
If the income elasticity of demand is positive, then the demand for the good or service is income elastic. This means that the quantity demanded of the good or service increases more than proportionately with an increase in income.
If the income elasticity of demand is negative, then the demand for the good or service is income inelastic. This means that the quantity demanded of the good or service increases less than proportionately with an increase in income.
If the income elasticity of demand is equal to 0, then the demand for the good or service is income unitary elastic. This means that the quantity demanded of the good or service increases proportionately with an increase in income.
In the case of option A, the percentage change in the quantity demanded is divided by the percentage change in income. This is the correct formula for calculating income elasticity of demand.
In the case of option B, the percentage change in the quantity demanded is divided by the quantity demanded. This is not the correct formula for calculating income elasticity of demand.
In the case of option C, the percentage change in income is divided by the percentage change in the quantity demanded. This is not the correct formula for calculating income elasticity of demand.
In the case of option D, the percentage change in income is divided by the quantity demanded. This is not the correct formula for calculating income elasticity of demand.