If the income elasticity of demand is equal to 1.43, it can be concluded that th
ID: 1166369 • Letter: I
Question
If the income elasticity of demand is equal to 1.43, it can be concluded that the good is:
Select one:
a. elastic
b. inelastic
c. normal
d. inferior
If the price of a good rises and the quantity purchased falls by a smaller proportionate amount, we say:
Select one:
a. Demand is elastic
b. Demand is inelastic
c. The firm should lower prices to increase revenue
d. The law of demand has been violated
Which of the following is NOT an example of a fixed cost?
Select one:
a. mortgage on a retail store
b. business property taxes
c. equipment rental
d. wages paid to workers
Explanation / Answer
1) Option:A elastic.
Explanation:If the income elasticity of demand is equal to 1.43 which is greater than 1 , it means that the good is a luxury good or a superior good. When income increases people will buy more amount of luxury good because they can now afford to buy it. Thus as income increases the demand for the superior commodity also increases. Thus such goods are income elastic in nature.
2) Option b. Demand is inelastic.
Explanation: If the price of a commodity increases by 15% and demand decreases by only 1.5% the demand is said to be inelastic in nature. Percentage change in demand will be less than the percentage change in price of the commodity.
3)Option D . Wages paid to the workers.
Explanation: fixed costs remains the same over a short term even if the firm still sales volume changes.Mortagage on retail stores, business property taxes, and equipment rental comes under fixed cost category. In case of wages paid to the workers, wages paid for the regular hours can be considered as fixed cost. But the extra time that they work comes under variable cost. Wages are paid on an hourly basis.It depends upon the total hours of work that the worker has done which can vary.