Suppose a 4 Percent Increase in Income Results in a 2

question 256

Essay

Suppose a 4 percent increase in income results in a 2 percent decrease in the quantity demanded of a good.Calculate the income elasticity of demand for the good and determine what type of good it is.

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Definitions:

Herfindahl Index

A measure of market concentration that is calculated by squaring the market share of each firm competing in a market and then summing the resulting numbers.

Economic Concentration

The degree to which a small number of firms occupy a large proportion of the market in a particular industry.

Market Shares

The portion of a market controlled by a particular company or product.

Horizontal Merger

A business consolidation that occurs between firms that operate in the same industry.