If the income elasticity of demand for a good is greater than one, it implies th
ID: 1123162 • Letter: I
Question
If the income elasticity of demand for a good is greater than one, it implies that:
A) as consumers’ incomes increase, the quantity demanded of the good falls.
B) sales of the good are highly sensitive to changes in consumers’ income.
C) the quantity demanded of the good increases during a recession.
D) an increase in consumers’ income will lead to a proportionate increase in sales of the good.
E) sales of the good are highly sensitive to changes in the prices of other goods.
A) as consumers’ incomes increase, the quantity demanded of the good falls.
B) sales of the good are highly sensitive to changes in consumers’ income.
C) the quantity demanded of the good increases during a recession.
D) an increase in consumers’ income will lead to a proportionate increase in sales of the good.
E) sales of the good are highly sensitive to changes in the prices of other goods.
Explanation / Answer
Answer
B) sales of the good are highly sensitive to changes in consumers’ income.
The income elasticity is a measure of change in the quantity of good demanded because of change in income, and the above 1 income elasticity shows the quantity demanded is highly sensitive to the income.