The Income Elasticity of Demand

question 105

Multiple Choice

The income elasticity of demand

• A) is positive only.
• B) is negative only.
• C) must lie between -1 and +1.
• D) can be positive, negative, or zero.

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Definitions:

Formula

A mathematical expression that calculates or describes a relationship among different variables.

Marginal Rate

The rate at which one variable changes as another variable changes marginally or slightly.

Substitution

The economic principle of replacing one input or good for another due to changes in prices or preferences.

Indifference Curve

A graph representing different combinations of goods or services among which a consumer is indifferent, showing preference levels.