The Income Elasticity of Demand _____

question 102

Multiple Choice

The income elasticity of demand _____.

• A)must be negative because of the law of diminishing marginal utility
• B)could be positive or negative or zero,depending on the nature of the good
• C)must be positive because consumers tend to buy more at higher incomes
• D)is usually zero because "you can only have so much"
• E)can never be zero

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Definitions:

Useful Life

The estimated duration for which an asset is expected to be functional and economically feasible for its intended purpose.

Annual Operating Income

The profit earned from a firm's normal core business operations, excluding deductions of taxes and interest charges.

Average Rate of Return

A financial metric used to estimate the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Internal Rate of Return

The discount rate that makes the net present value (NPV) of all cash flows from an investment equal to zero.