The Income Elasticity of Demand for Calculators Is 0

question 54

Multiple Choice

The income elasticity of demand for calculators is 0.2. A 5% increase in income will cause:

• A) a 25% increase in the quantity demanded of calculators
• B) a 1% increase in the quantity demanded of calculators
• C) a 25% decrease in the quantity demanded of calculators
• D) a 10% increase in the quantity demanded of calculators

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Definitions:

Project Profitability Index

A financial metric used to determine the relative profitability of a project, calculated by dividing the present value of future expected cash flows by the initial investment.

Present Value

The present value of a future amount of money or series of cash inflows, considering a particular rate of interest.

Cash Inflows

Money received by a business from its operational, investing, and financing activities.

Discount Rate

The rate utilized in calculating the present value of anticipated future cash flows in discounted cash flow analysis.