If the Income-Elasticity Coefficient for Coffee Is 0

question 74

Multiple Choice

If the income-elasticity coefficient for coffee is 0.5,the demand for coffee will ________.

• A) decrease 0.5 percent for every 1.0 percent increase in income
• B) increase 1.0 percent for every 5.0 percent increase in income
• C) increase 0.5 percent for every 1.0 percent increase in income
• D) decrease 0.5 percent for every 0.5 percent increase in income

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Definitions:

Marginal Utility

The added delight or usefulness a person acquires by consuming an extra unit of a good or service.

Utility Theory

A concept in economics that suggests individuals make decisions based on the expected utility or satisfaction they will derive from those decisions.

Consumer Surplus

The disparity between what consumers are inclined and financially able to spend on a good or service compared to what they ultimately pay.

Marginal Utility

The boost in satisfaction or utility a person enjoys from consuming another unit of a good or service.