If the Income Elasticity of Demand for Good Smartphone Apps

question 6

Multiple Choice

If the income elasticity of demand for good smartphone apps is 5 and the percentage change in income is 10 percent,what is the percentage change in the quantity consumed?

• A) -0.5 percent
• B) -5 percent
• C) 50 percent
• D) 0.5 percent
• E) 2 percent

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Definitions:

Returns to Scale

The change in output resulting from a proportional change in all inputs, where increases can be constant, increasing, or decreasing.

Long-Run Average Cost

The average cost per unit of output where all inputs, including capital, are variable in the long term.

Marginal Cost

The costs entailed in generating an extra unit of a product or service.

Economies of Scale

The reduction in per-unit production costs resulting from an increase in the scale of production.