If a Person's Income Rises and They Do Not Increase

question 40

Multiple Choice

If a person's income rises and they do not increase their consumption,we can conclude that

• A) the good is not inferior.
• B) their income elasticity of demand is zero.
• C) the good is not normal.
• D) no conclusions can be made without knowing the person's initial income and consumption levels.

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Definitions:

Asymmetric Information

A condition in which one party in a transaction has more or superior information compared to another, potentially leading to an imbalance in the transaction.

Buyer

An individual or entity that purchases goods or services from another entity, typically in the context of an economic market.

Seller

An individual or business that offers goods or services for sale to consumers or other businesses.

Lemons Problem

A phenomenon where the presence of information asymmetry in a market leads to low-quality products being sold, as sellers have more information about the product than buyers.