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Question
Macroeconomics
Posted 5 months ago
What does income elasticity of demand describe?
Choose 1 answer:
(A) How much the quantity bought of a good changes when the price of another good changes
(B) How much labor supplied changes in response to a change in wages
(c) How much the quantity bought of a good changes when its price changes
(D) How responsive sellers are to a change in the price of another good.
(E) How much the quantity bought of a good changes when buyers' incomes change
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Answer from Sia
Posted 5 months ago
Solution
a
Income Elasticity of Demand Definition: Income elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in consumer income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income
b
Correct Option Identification: Based on the definition of income elasticity of demand, we need to identify which option correctly describes this concept
Answer
Option 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 degree to which the quantity demanded of a good changes in response to a change in consumer income.
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