Suppose That the Income Elasticity of Demand for Good X

question 91

Multiple Choice

Suppose that the income elasticity of demand for good X is greater than 1. Other things being equal, which of the following statements is INCORRECT?

• A) Good X is a normal good.
• B) The quantity demanded of good X decreases as a consumer's income declines.
• C) A consumer buys more X as income rises, but the share of income spent on good X falls.
• D) A consumer buys more X as income rises and the share of income spent on good X also rises.

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Definitions:

Dividends

Dividends are payments made by a corporation to its shareholder members, reflecting a portion of the corporate profits allocated for distribution.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, are subtracted from total revenue.

Revenue

The income received by a company from its business activities, usually from the sale of goods and services to customers.

Expenses

Money spent or cost incurred in an entity's efforts to generate revenue, representing the cost of doing business.