Asked by Julie RoseModelProductions on May 08, 2024
Verified
You notice that whenever incomes rise by 5 percent, people buy 3 percent more of Good A. This suggests that Good A has a negative income elasticity of demand.
Income Elasticity
The ratio of the percentage change in the quantity demanded of a good to the percentage change in consumer income, used to measure how changes in income affect demand.
Negative
Typically associated with undesirable outcomes or attributes, indicating a deficit or reduction.
Good A
A hypothetical or generic product or service that is used as an example in economic theories or problems.
- Comprehend the principle and importance of income elasticity of demand.
Verified Answer
BB
Brisa BuenrostroMay 15, 2024
Final Answer :
False
Explanation :
The positive relationship between income rise and the increase in quantity demanded for Good A indicates that Good A has a positive income elasticity of demand, meaning it is a normal good.
Learning Objectives
- Comprehend the principle and importance of income elasticity of demand.