Suppose a 4 Percent Increase in Income Results in a 2

question 256

Essay

Suppose a 4 percent increase in income results in a 2 percent decrease in the quantity demanded of a good.Calculate the income elasticity of demand for the good and determine what type of good it is.

---

Definitions:

Net Income

The total profit of a company after all expenses, including taxes, have been deducted from total revenue.

Common Stock

Common stock represents ownership shares in a corporation, entitling holders to vote on company matters and potentially receive dividends.

Retained Earnings

Retained earnings represent the portion of net earnings not paid out as dividends but retained by the company to be reinvested in its core business or to pay debt.

Income Statement

A financial statement that shows a company's revenues, expenses, and profits or losses over a particular period.