Good a Has an Income Elasticity Equal to 0

question 80

Multiple Choice

Good A has an income elasticity equal to 0.4 and a cross price elasticity with respect to Good B of 1.2. Then:

• A)​Good A is an inferior good and Goods A and B are substitutes.
• B)​Good A is an inferior good and Goods A and B are complements.
• C)​Good A is a normal good and Goods A and B are substitutes.
• D)​Good A is a normal good and Goods A and B are complements.

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Definitions:

Large Aggregates

Broad categories or totals in economic data that combine several individual elements, such as national income, GDP, or total employment.

Economy as a Whole

A broad view of all the economic activities and transactions in a country or region, encompassing consumer, business, and government spending, investments, and trade balance.

Scarcity Problem

A situation where unlimited wants exceed the limited resources available to fulfill those wants, necessitating prioritization and decision-making.

Economic Wants

Desires for goods and services that individuals and businesses are willing to pay for, which drive economic activity and resource allocation.