Income Elasticity of Demand Measures the Extent to Which

question 15

Multiple Choice

Income elasticity of demand measures the extent to which

• A)the price of a good changes when there is a change in income.
• B)the quantity demanded of a good changes when income changes.
• C)real household income changes when there is a change in the price of a good.
• D)one household's income changes when there is a change in the income of another household.
• E)quantity demanded changes when there is a change in price.

---

Definitions:

Imported Raw Materials

Raw or unprocessed goods brought into a country from abroad for use in manufacturing or production.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of goods and services produced by an economy in a given year, expressed in base-year prices.

Nominal GDP

GDP based on prices prevailing at the time of production.

Price Level

A measure of the average prices of goods and services in an economy at a specific point in time.