If the Demand for a Product Has an Income Elasticity

question 56

Multiple Choice

If the demand for a product has an income elasticity of -3.4,we can conclude that

• A)an increase in income will lead to an increase in demand for the product.
• B)the product is certainly a necessity.
• C)the product is a normal good.
• D)the product has a rising income-consumption curve.
• E)a decrease in income will lead to an increase in demand for the product.

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Definitions:

Money Supply

The complete amount of currency resources available within an economy, covering cash, coins, and the totals in checking and savings accounts, at a particular time.

Potential Growth

The estimated rate at which an economy could grow considering the full utilization of its resources without causing inflationary pressures.

Rational Expectations Theory

The hypothesis that individuals make predictions about future economic activities based on past and current information and act rationally on those expectations.

Anticipation

The act of expecting or foreseeing something, often involving preparatory action or adjustments based on predictions about future events or trends.