If Incomes Fall by 5 Percent and the Quantity Demanded

question 40

Multiple Choice

If incomes fall by 5 percent and the quantity demanded for new cars falls by 10 percent,

• A)New cars are a normal good,and the income elasticity is +.5.
• B)New cars are an inferior good,and the income elasticity is +2.0.
• C)New cars are a normal good,and the income elasticity is +2.0.
• D)New cars are an inferior good,and the income elasticity is +0.5.

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Definitions:

Area

The quantifiable space within the boundaries of a two-dimensional shape, measured in square units.

Standard Normal

A normal distribution with a mean of 0 and a standard deviation of 1, used as a basis for comparison with other normal distributions.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values; a low standard deviation indicates that the values tend to be close to the mean, whereas a high standard deviation indicates that the values are spread out over a wider range.

Mean

The average value of a set of numbers, calculated by dividing the sum of all the numbers by the count of numbers.