For Which of the Following Goods Is the Income Elasticity

question 13

Multiple Choice

For which of the following goods is the income elasticity of demand likely to be largest?

• A)poultry products
• B)meals at restaurants
• C)lemonade
• D)used books
• E)paperback mystery novels

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Definitions:

Substitution Effect

The change in consumption patterns due to a change in relative prices of goods, leading individuals to substitute cheaper goods for more expensive ones.

Compensated Demand Function

A demand function that adjusts for changes in income to show how quantities demanded by consumers change in response to a price change while keeping utility constant.

Adequately Paid

Compensation that meets or exceeds the value of the work performed or the qualifications of the individual.

Utility Function

This describes a formula used in economics to quantify the happiness or satisfaction obtained by a consumer from consuming goods and services.