Suppose the Value of Income Elasticity of Demand for a Private

question 108

Multiple Choice

Suppose the value of income elasticity of demand for a private college education is equal to 1.5. This means that

• A) every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education.
• B) every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education.
• C) a 10 percent increase in income causes a 15 percent increase in the quantity of private college education purchased.
• D) a 15 percent increase in income causes a 10 percent increase in the quantity of private college education purchased.
• E) a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent.

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Definitions:

Dishabituation

A renewal of attention or a response to a stimulus that had previously become familiar through habituation.

Stimulus

An external factor or event that provokes a specific functional reaction in an organ or tissue.

Renewed Interest

A revived or rekindled focus and curiosity in a particular subject, activity, or issue that perhaps had been previously set aside or overlooked.

Visual Stimulus

Any object or event in the environment that draws visual attention or elicits a visual response.