Table 5-7 The Following Table Shows a Portion of the Demand Schedule

question 497

Multiple Choice

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.
-Refer to Table 5-7. Using the midpoint method, at a price of $12, what is the income elasticity of demand when income rises from $5,000 to $10,000?

• A)0.00
• B)0.41
• C)1.00
• D)2.45

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Definitions:

Book Income

The income reported by a corporation for financial reporting purposes, which may differ from taxable income.

Federal Income Tax

A tax levied by the U.S. government on the annual earnings of individuals, corporations, trusts, and other legal entities.

Earnings and Profits

A measure of a corporation's ability to pay dividends to its shareholders, calculated for tax purposes.

FMV

Fair Market Value refers to the price at which property would sell on the open market between a willing buyer and a willing seller.