If a Good Has an Income Elasticity of 0

question 43

Multiple Choice

If a good has an income elasticity of 0.18, then it is a(n) _____ good and a _____.

• A) normal; necessity
• B) normal; luxury
• C) inferior; necessity
• D) inferior; luxury

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Definitions:

Equity

The concept of fairness in economics, which may refer to ownership interest in a company (as in stockholders' equity) or to a principle of justice and fairness in the distribution of wealth and resources.

Deadweight Loss

A societal expense arising from market inefficiency, happening when there is a mismatch between supply and demand.

Equilibrium

A state in a market where the supply of a good matches its demand, resulting in stable prices.

Progressive Income Tax

A tax system in which the tax rate increases as the taxable amount increases, leading to higher earners paying a higher rate of tax on their income.