Suppose That the Income Elasticity of Demand for Frozen Dinners

question 217

Multiple Choice

Suppose that the income elasticity of demand for frozen dinners is negative. Other things being equal, which of the following statements is INCORRECT?

• A) Frozen dinners are an inferior good.
• B) The quantity demanded of frozen dinners increases as a consumer's income declines.
• C) There exists a negative relationship between income and the demand for frozen dinners.
• D) The share of income spent on good X must decrease as a consumer's income decreases.

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Definitions:

Year-End Costs

Expenses or costs incurred by a business at the end of the fiscal year; these may include adjustments, accruals, and prep for financial reporting.

Inventory Cost Flow

An accounting method that determines the value of sold inventory and ending inventory, can be FIFO, LIFO, or Average Cost.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue. It represents the company's bottom line.

Rising Prices

An economic situation characterized by a general increase in the prices of goods and services.