The Income Elasticity of Demand Measures

question 310

Essay

The income elasticity of demand measures:
A.how much the quantity demanded changes in response to a price change.
B.how much a consumer can buy at given income levels.
C.how much consumer purchasing power is affected when prices change.
D.how the demand for a good changes in response to changes in income.

---

Definitions:

Discount Rate

Typically refers to the interest rate that central banks charge commercial banks for loans, serving as a reference rate in financial calculations.

Net Present Value

The differentiation in the now-value of cash transactions, both incoming and outgoing, over a defined period.

Profitability Index

Profitability Index is a financial metric that calculates the relative profitability of an investment by dividing the present value of future cash flows by the initial investment cost.

Benefit-Cost Perspective

A method of evaluating projects or decisions by comparing the benefits they will generate to the costs required to implement them.