The Income Elasticity of Demand Measures

question 8

Multiple Choice

The income elasticity of demand measures:

• A) How the quantity demanded changes in relation to price changes.
• B) How the quantity demanded changes in relation to income changes.
• C) A movement along the demand curve.
• D) The sensitivity of supply to changes in income.

---

Definitions:

Wage Increase

An upward adjustment in employees' earnings per hour worked or salary.

Price-Taker Markets

Markets in which individual sellers or buyers cannot influence the price of a good or service and must accept the market price as given.

Market Price

The current price at which an asset or service can be bought or sold in the open market.

Differentiated Products

Products distinguished from similar products by characteristics like quality, design, location, and method of promotion.