Suppose the Income Elasticity of Demand Is -0

question 127

Multiple Choice

Suppose the income elasticity of demand is -0.5 for good X.This implies that a 5% decrease in income will cause the quantity demanded of good X to

• A)increase by 2.5%,and X is an inferior good.
• B)decrease by 2.5% and X is a normal good.
• C)increase by 10% and X is an inferior good.
• D)decrease by 10% and X is a normal good.

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Definitions:

Horizontal Analysis

Amounts of items compared on the same line of comparative financial reports. Horizontal analysis can also be in the form of a trend analysis.

Trend Percentage

A financial analysis tool that shows how a financial statement item changes over time, often used to spot patterns or trends.

Sales

The total amount of goods or services sold by a company during a specific time period, generating revenue.