Question

If the price of steak rises, other things constant

A) the real income of steak buyers will rise.

B)everyone’s real income will rise.

C)the real income of steak buyers will fall.

D)everyone’s money income will rise.

The less sensitive people are to change in price, the...

A) smaller a change in price must be to induce a certain change in quantity demanded.

B)greater the price elasticity of demand.

C)smaller the price elasticity of demand.

D) closer the price elasticity of demand is to one.

Answer 1

Real income refers to the income of an individual or group taking into consideration the effects of inflation on purchasing power.

C) The real income of steak buyers will fall.

Price elasticity of demand Ed = Percentage change in quantity demanded/percentage change in price
When a 1% change in price calls forth more than 1% change in quantity demanded, the good has price elastic
demand.
When a 1% change in price calls produces less than 1% change in quantity demanded, the good has price inelastic
demand.
When a 1% change in price calls produces a 1% change in quantity demanded, the good has unit elastic
demand.

C) smaller the price elasticity of demand.