When Income Increases from $20,000 to $30,000 the Quantity of Inter-City

question 51

Multiple Choice

When income increases from $20,000 to $30,000 the quantity of inter-city bus trips taken per year decreases from 10 to 8.Hence

• A) inter-city bus trips are a normal good.
• B) the income elasticity of demand for inter-city bus trips is -1.8.
• C) the income elasticity of demand for inter-city bus trips is -0.56.
• D) Both answers A and B are correct.
• E) Both answers A and C are correct.

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Definitions:

Poverty Rate

The percentage of the population living below the national poverty line, often defined as the share of people with income less than a specific threshold indicating minimal living conditions.

Absolute Scale

A scale of measurement without any zero point or arbitrary reference point, used in fields like temperature measurement with the Kelvin scale.

Life Cycle Hypothesis

An economic theory suggesting that individuals plan their consumption and savings behavior over their lifetime, aiming for a stable level of consumption.

Permanent Income Hypothesis

The theory that an individual's consumption patterns are based on their long-term income expectations rather than their current income.