An Income Elasticity of Demand for Milk of 0

question 37

Multiple Choice

An income elasticity of demand for milk of 0.1 could mean that

• A) as income rises by 10 percent, quantity demanded rises by 1 percent.
• B) as income rises by 100 percent, quantity demanded rises by 1 percent.
• C) as income rises by 20 percent, quantity demanded rises by 10 percent.
• D) as income rises by 50 percent, quantity demanded rises by 25 percent.

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Definitions:

Natural Monopolist

A single firm that can supply a product or service to an entire market at a lower cost than two or more firms, due to economies of scale.

Marginal Cost

The increase in expense a business incurs by manufacturing one more unit of an item.

Subsidize

The act of providing financial assistance or support, typically by the government, to reduce the cost of producing goods or services.

Antitrust Laws

Legislation enacted by the government to prevent new monopolies from forming and police those that exist to protect consumers from exploitative practices.