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Question
Microeconomics
Posted 8 months ago
What does income elasticity of demand describe?
Choose 1 answer:
(A) How much the quantity bought of a good changes when its price changes
(B) How responsive sellers are to a change in the price of another good.
(c) How much the quantity bought of a good changes when the price of another good changes
(D) How much labor supplied changes in response to a change in wages
(E) How much the quantity bought of a good changes when buyers' incomes change
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Answer from Sia
Posted 8 months ago
Solution
a
Definition of Income Elasticity of Demand: Income elasticity of demand measures how much the quantity demanded of a good changes in response to a change in consumers' income
b
Correct Answer Identification: The correct answer is (E) How much the quantity bought of a good changes when buyers' incomes change
Answer
(E) How much the quantity bought of a good changes when buyers' incomes change
Key Concept
Income Elasticity of Demand
Explanation
Income elasticity of demand describes the responsiveness of the quantity demanded of a good to a change in consumers' income. It helps to understand whether a good is a normal good (positive income elasticity) or an inferior good (negative income elasticity).
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