If a 10 Percent Increase in Income Induced a Group

question 225

Multiple Choice

If a 10 percent increase in income induced a group of consumers to reduce their yearly purchases of eggs by 5 percent, for these consumers,

• A) the income elasticity of eggs equals approximately 1.05.
• B) the income elasticity of eggs is 0.5.
• C) eggs are a luxury good.
• D) eggs are an inferior good.

---

Definitions:

Market Rate

The prevailing interest rate available in the general market.

Maturity Value

The amount that will be paid to the holder of a financial instrument at its maturity date, including principal and any remaining interest.

Premium

The amount paid for an insurance policy or the amount by which a bond or stock's value exceeds its underlying or face value.

Market Rate

The prevailing interest rate available in the marketplace for securities, loans, and deposits.