Question

Assume that a 6 percent increase in income in the economy produces a 3 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is

Answer #1

Income elasticity of demand indicates us the percentage change in quantity demanded for each 1 percent change in the income of the consumer. Here the income of the consumer increases by 6 percent. Hence, as a result the quantity demanded rises by 3 percent for good X. This makes the coefficient of income elasticity of demand equal to

em = % change in QD/% change in M = 3%/6% = 0.5

Hence, coefficient of income elasticity of demand is 0.5 and is positive reflecting that good X is a normal good.

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Which of the following statements is correct regarding Good Z?
Group of answer choices
Good Z is a inferior good, and Goods Z and Y are
complements.
Good Z is an inferior good, and Goods Z and Y are
substitutes.
Good Z is a normal good, and Goods Z and Y are complements.
Good Z...

Income Elasticity Exercise:
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2a. Calculate the income elasticity of demand for macaroni and
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2b. Is macaroni and cheese a normal good or an inferior good?
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2d. Is chicken a normal good or an inferior...

A measure of the rate of percentage change of quantity demanded
with respect to price, holding all other determinants of demand
constant is
a.
Income elasticity of demand
b.
Own price elasticity of demand
c.
Price elasticity of market equilibrium
d.
Cross price elasticity of demand
The value of the income elasticity of demand coefficient for
Good X is given as 0.1. This means that
a.
as income increases by 10 percent, quantity demanded rises by 1
percent.
b.
as income...

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c) cross-price elasticity of demand for soda is -0.5.
d) cross-price elasticity of demand for iced tea is 2.

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