If the Income Elasticity of Demand for a Good Is

question 36

Multiple Choice

If the income elasticity of demand for a good is 0.75,a 25% increase in income results in

• A)an 18.75% increase in quantity demanded.
• B)a 3% increase in quantity demanded.
• C)a 0.1875% increase in quantity demanded.
• D)a 3% decrease in quantity demanded.
• E)There is not enough information to answer.

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Definitions:

Internal Rate Of Return

A financial metric used to evaluate the profitability of investments, representing the interest rate at which the net present value of costs and benefits of a project break even.

Salvage Value

The anticipated salvage value of an asset at the termination of its service life.

Annual Cash Flows

The total amount of money being transferred into and out of a business, especially affecting liquidity, within a year.

Opportunity Cost

The cost of opting for one choice over another, essentially the benefits you could have received by taking an alternative action.