If a Consumer Increases Her Quantity of Ice Cream Consumed

question 21

Multiple Choice

If a consumer increases her quantity of ice cream consumed by 100% when her income rises by 25%, then her income elasticity of demand for ice cream is

• A)8.0.
• B)4.0.
• C).25.
• D).08.

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Definitions:

Economies of Scale

Reduction in per unit cost as the volume of production increases, due to factors like bulk purchasing and efficient use of resources.

Technological Change

The overall process of invention, innovation, and diffusion of technology or processes.

Returns to Scale

The rate at which output increases in response to proportional increases in all inputs or resources, reflecting the production efficiency of a firm.

Long-Run Average Total Cost

The per unit cost of production in the long run, where all inputs, including capital, are variable.