"The Income Elasticity of a Good Is Positive If a Consumer

question 188

Essay

"The income elasticity of a good is positive if a consumer increases the total spending on that good as a result of an increase in its market price." Do you agree or disagree? Why?

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Definitions:

Level Of Consumption

The total amount of goods and services consumed by households over a certain period.

MPC

Marginal Propensity to Consume, which is the proportion of an increase in income that gets spent on consumption.

MPS

The marginal propensity to save, which is the fraction of an increase in income that is saved rather than spent.

Milton Friedman

An American economist known for his strong belief in free-market capitalism.