Suppose the Income Elasticity of Demand Is -0

question 127

Multiple Choice

Suppose the income elasticity of demand is -0.5 for good X.This implies that a 5% decrease in income will cause the quantity demanded of good X to

• A)increase by 2.5%,and X is an inferior good.
• B)decrease by 2.5% and X is a normal good.
• C)increase by 10% and X is an inferior good.
• D)decrease by 10% and X is a normal good.

---

Definitions:

Quiet Period

A time frame in which companies are restricted from making certain announcements to prevent affecting their stock price before a securities offering.

Lockup Agreement

A contract stating that shareholders of a newly issued stock agree not to sell their shares for a certain period following an initial public offering.

Initial Public Offering (IPO)

The first sale of stock by a company to the public, marking a transition from a private to a publicly traded company.

Share Repurchase Program

A plan initiated by a company to buy back its own shares from the marketplace, which can signal confidence in the business and often leads to an increase in the share price.