Suppose the Income Elasticity of Demand for Used Jet Skis

question 47

Multiple Choice

Suppose the income elasticity of demand for used jet skis is 3.5.If the level of income decreases by 1 percent,the number of used jet skis sold will,ceteris paribus,

• A)Rise by 0.29 percent.
• B)Rise by 3.5 percent.
• C)Fall by 0.29 percent.
• D)Fall by 3.5 percent.

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Definitions:

Allocative Efficiency

A state of the economy in which resources are allocated in a way that maximizes the total benefit to society.

Collusive Oligopoly

A market structure where a few firms dominating the market agree to set prices or output levels, reducing competition and maximizing collective profits.

Limit Pricing

A strategy where a firm sets the price of its products low enough to discourage new competitors from entering the market.

Price Leadership

A strategy where a leading firm sets prices that other firms in the market follow.