For Product X, the Income Elasticity of Demand Is -2

question 433

Multiple Choice

For Product X, the income elasticity of demand is -2.56. Which of the following is therefore TRUE?

• A) Product X is a necessity.
• B) Product X is a luxury.
• C) Product X is an inferior good.
• D) Product X is a normal good.

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Definitions:

Socialism

A political and economic system where the means of production, distribution, and exchange are owned or regulated by the community as a whole.

Total Surplus

An economic measure representing the total benefits to consumers and producers, achieved by the difference between the willingness to pay and the actual price paid, plus the cost savings to producers.

Trade

The exchange of goods, services, or both between two or more parties, either within a country or across international borders.

Sales Tax

A tax imposed by governments on the sale of goods and services, collected at the point of sale and typically expressed as a percentage of the sale price.