If Sarah's Income Rises by 20 Percent, And, as a Result

question 146

Multiple Choice

If Sarah's income rises by 20 percent, and, as a result, she purchases 40 percent more designer clothing, her income elasticity for designer clothing is

• A) 0.5.
• B) 1.0.
• C) 2.0.
• D) Not enough information is given to answer this question.

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Definitions:

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity of that good that consumers are willing and able to purchase at various prices.

Gasoline

A volatile, flammable liquid derived from petroleum, used primarily as fuel in internal combustion engines.

Demand Curve

A chart that illustrates how the quantity of a product demanded by customers correlates with its price.

Normal Good

A product whose demand increases when people's incomes increase, and falls when incomes decrease, all else being equal.