When Income Increases by 1%,the Quantity Demanded of a Good

question 11

Essay

When income increases by 1%,the quantity demanded of a good decreases by 2%.What is the income elasticity of the good? Is the good normal or inferior? Why?

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Definitions:

Note Payable

A written promise to pay a specified amount of money, usually with interest, at a future date; a form of debt.

Interest Rate

The percentage of a sum of money charged for its use, typically expressed as an annual rate.

Accrued Interest

Interest that has accumulated over a period but has not yet been paid or received.

Adjusting Journal Entry

A journal entry made at the end of an accounting period to record unrecognized income or expenses to ensure that the financial statements comply with the accrual concept of accounting.