A consumer spends all of her income on only one good. a) What is the income elasticity of demand...
Question:
A consumer spends all of her income on only one good.
a) What is the income elasticity of demand for this good?
b) What is the own price elasticity of demand for this good?
Income Elasticity of Demand
Income elasticity of demand is the rate at which quantity demanded changes as a result of the change in the income of the consumer, other things being equal.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answerLet the 'X' be the quantity of goods demanded.
Price of good = P
The income of consumer = Y
Consumer spends all her income on one good, therefore
...
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
Income Elasticity of Demand in Microeconomics
from
Chapter 2 / Lesson 13
11K
In microeconomics, the principle of income elasticity of demand, which illustrates the relationship between demand and income, is important to understand the field as a whole. In this lesson, dive into the definition of income elasticity of demand and understand how it impacts normal goods, necessities, and inferior goods.
Related to this Question
- a) If the income elasticity of demand for a good is negative, that good is called a _________ good. b) The same price elasticity of demand for a good is always _________ since demand curves slope downward. c) If the income elasticity of demand for a good
- The own price elasticity of demand for good X is -2, its income elasticity is 3, its advertising elasticity is 4, and the cross-price elasticity of demand between it and good Y is -6.Determine how much the consumption of this good will change if: a. The
- Suppose the own-price elasticity of demand for good X is -2, its income elasticity is 3, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4. Determine how much the consumption of this good, will change if
- Suppose the income elasticity of demand for good X is 2, its own price elasticity of demand is -4, its advertising elasticity is 3, and the cross-price elasticity of demand between it and good Y is -6. Determine how much the consumption of this good will
- If a 5% increase in consumer incomes leads to a 10% increase in the quantity demanded for a good, the good is a(n) _____ good with an income elasticity of _____.
- Suppose the own-price elasticity of demand for good X is -4, its income elasticity is 2, its advertising elasticity is 3, and the cross-price elasticity of demand between good X and good Y is -3. Determine how much the consumption of this good will change
- Suppose the own price elasticity of demand for good x is -3, its income elasticity is 2, and the cross price elasticity of demand between good x and y is -5. Determine how much the consumption of this good will change if: a) The price of good x increases
- If a good is normal, we know that: a. income elasticity is positive. b. the good's price elasticity of demand is positive. c. demand for the good is elastic. d. demand for the good is inelastic. e. income elasticity is negative.
- Suppose the own price elasticity of demand for good X is -2, its income elasticity is 3, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4. Determine how much the consumption of this good will change
- Suppose the own price elasticity of demand for good X is -3, its income elasticity is -3, its advertising elasticity is 4, and the cross-price elasticity of demand between it and good Y is 2. Determine how much the consumption of this good will change in
- Suppose the own-price elasticity of demand for good X is -3, its income elasticity is -2, its advertising elasticity is 3, and the cross-price elasticity of demand between it and good Y is -5. Determine how much the consumption of this good will change i
- Suppose the own-price elasticity of demand for good X is -3, its income elasticity is 1, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4. Determine how much the consumption of this good will change if:
- Suppose the own price elasticity of demand for good X is -5, its income elasticity is 2, its advertising elasticity is 4, and the cross-price elasticity of demand between it and good Y is 3. Determine how much the consumption of this good will change if:
- Suppose the own price elasticity of demand for good X is -4, its income elasticity is 3, its advertising elasticity is 3, and the cross-price elasticity of demand between it and good Y is 5. Determine how much the consumption of this good will change if:
- If a good has an income elasticity of demand equal to 2.7, how will the quantity demanded change when consumer income rises by 4 percent? \\ A. Quantity demanded will rise by 10.8 percent B. Quantity demanded will rise by 2.7 percent C. Quantity demand
- If a good has an income elasticity of demand equal to 2.7, how will the quantity demanded change when consumer income rises by 4 percent? A. Quantity demanded will rise by 10.8 percent B. Quantity de
- When a 10% increase in income causes a 4% increase in quantity demanded of a good: a. The price elasticity of demand is 0.4 and the good is an inferior good, b. The income elasticity is 2.5 and the good is a normal good, c. The income elasticity is 0.4 a
- The price elasticity of demand for a good is -2.0. When the price of this good rises, what occurs? \\ A) Quantity demanded will rise as well B) The income of those who buy the good will increase C) Total expenditure on this good will fall. D) All of t
- Suppose the own price elasticity of demand for good X is -3 with an income elasticity of 1, an advertising elasticity of 2, and the cross-price elasticity of demand between it and good Y is -4. Determ
- Suppose the own price elasticity of demand for good x is -2, its income elasticity is 3, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good y is -4. Determin
- Suppose the own price elasticity of demand for good X is -3, its income elasticity is 1, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4. Determi
- Suppose the own price elasticity of demand for good X is -5, its income elasticity is -3, its advertising elasticity is 3, and the cross-price elasticity of demand between it and good Y is 5. Determin
- Suppose the own-price elasticity of demand for good __X__ is -3, its income elasticity is 1, its advertising elasticity is -2 and the cross-price elasticity of demand between its good __Y__ is -4. Determine how much the consumption of this goodwill change
- If the price elasticity of demand for a good is less than one in absolute value, economists would characterize consumers of this good _.
- Suppose the own price elasticity of demand for good X is -2, income elasticity is 3, advertising elasticity is 4, cross price elasticity between it and good Y is -6. Determine how much the consumption of this good will change if: a) The price of good X
- Demand for a good is Q = 0.5I / P. it follows that a. The income elasticity of demand depends on the current price level. b. The income elasticity of demand is negative. c. The good is inferior. d. T
- Suppose the own price elasticity of demand for good X is -3, its income elasticity of demand is 1, its advertising elasticity of demand is 2, and the cross price elasticity of demand between it and good Y is -4. Determine how much consumption of this goo
- Suppose the own-price elasticity of demand for good X is -3, its income elasticity is 1, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4. Determine how much the consumption of this goodwill change if:
- The price elasticity of demand tends to be higher for goods a. For which the consumer spends a high percentage of his or her income b. That are in scarce supply c. For which the consumer spends a low
- The price elasticity of a demand for a good is -0.94, the cross-price elasticity is 1.94, the income elasticity is 1.23, and consumers currently purchase 1,318 units of the good. Find the change in un
- Income elasticity of demand measures how: a. the quantity demanded changes as consumer income changes. b. consumer purchasing power is affected by a change in the price of a good. c. the price of a good is affected when there is a change in consumer incom
- Suppose the own-price elasticity of demand for good X is -5, its income elasticity is 2, its advertising elasticity is 3, and the cross-price elasticity of demand between it and good Y is 6. Determine how much the consumption of this goodwill change if:
- Suppose the own price elasticity of demand for a good X is -3, its income elasticity is, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4. Determin
- Suppose the own price elasticity of demand for a good X is -3, its income elasticity is 1, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4. Determ
- Suppose the own price elasticity of demand for good X is -3, its income elasticity is 1, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4. Determin
- Income effects depend on the income elasticity of demand for each good that you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?
- Suppose the own price elasticity of demand for good X is -5, its income elasticity is 2, its advertising elasticity is 3, and the cross-price elasticity of demand between it and good Y is 6. Determine
- For a good to be considered a normal good, then _ must be _. a. Cross-price elasticity of demand; less than 0 b. Income elasticity of demand; between 1 and 0 c. Income elasticity of demand; greater th
- Price elasticity of demand for a good depends on the price of the good relative to the consumer's incomes. Of the following goods, which one has most elastic demand? a) Thumbtacks b) Lighter fluid c)
- When a 5% increase in income causes a 3% drop in quantity demanded of a good: a. the income elasticity is 0.6 and the good is an inferior good. b. the cross-price elasticity is 0.6 and the good is an inferior good. c. the income elasticity is 1.67 and th
- Suppose the own price elasticity of demand for good X is -2, its advertising elasticity is 2, its income elasticity is 3, and the cross-price elasticity of demand between it and good Y is -4. Determin
- Suppose that the own price elasticity of market demand for good 1 is -2. Suppose that the supply of good 1 increases by 4%. Consumer incomes and the prices of all other goods remain the same.
- Suppose the own price elasticity of demand for good X is -3, its income elasticity is 1, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y = -4. Determine
- Suppose the own price elasticity of demand for good X is -4, its income elasticity is 3, its advertising elasticity is 4, and the cross-price elasticity of demand between it and good Y is 4. Determine
- Suppose you have the demand function given: d=40- 2p^2+m, where M is income and P is the price of a good . You have an income of $100. a) Compute the price elasticity of demand. b) If P=1, is the good elastic, inelastic or unit elastic? c) Assuming P=1, c
- The price elasticity of demand for a good is -2.0. When the price of this good rises, what occurs? a. Quantity demanded will rise as well. b. The income of those who buy the good will increase. c. Total expenditure on this good will fall. d. All of the ab
- Assume a 3% increase in income produces a 1% decline in demand. Income elasticity of demand is: A. 3 so the good is normal B. 1/3 so the good has inelastic demand C. -1/3 so the good is inferior D. -3 so the good is inferior
- Suppose the own price elasticity of demand for good Xis -3, its income elasticity is 1, its advertising elasticity is 2, and the cross-price elasticity of demand between it and good Y is -4. Determine
- Suppose Good A has the following elasticities: Price elasticity of demand = 2.5 Income elasticity of demand = 0.75 Cross price elasticity of demand to Good B = 1.5 a) If the price of Good A increases
- The price elasticity of demand of good X is -2 and of good Y is -3. Which of the two goods is more price elastic and why?
- The income elasticity of demand is calculated as the percentage change in the: A. Demand for good "X" divided by the percentage change in the consumer's income. B. Quantity demanded of good "X" divi
- If consumers always spend 15% of their income on food, then the income elasticity of demand for food is 1.00. Why?
- A consumer's demand for the single good x is given by x(p,y)=y/p, where p is the good's price, and y is the consumer's income. Let income be $7. Find the compensating variation for an increase in the
- The responsiveness of demand to changes in income holding the good's relative price constant is a) income elasticity of demand. b) price elasticity of demand. c) elasticity of supply. d) cross-price elasticity of demand.
- Which elasticity of demand measures how the quality demanded of one good response to a change in the price of another good? a. Income elasticity of demand b. Compared elasticity of demand c. Revenue elasticity of demand d. The cross-price elasticity of d
- If the price of a good decreases and the total expenditure for a consumer on that good increases, then: a. the consumer surplus attached to the good has increased. b. the consumer surplus attached to the good has decreased. c. the price elasticity of dema
- Suppose that the government must raise revenue through the taxation of two goods. The own-price elasticity of demand for good 1 is 5 and the own-price elasticity of demand for good 2 is 7. (a) If mar
- When the income elasticity of demand for a good is negative, the good is a. Normal good. b. Luxury good. c. Inferior good. d. Giffen good.
- The elasticity of demand is used to: A) determine if consumers will or will not buy a product. B) measure how responsive consumers are to a change in price. C) determine in what direction the demand curve shifts if income changes. D) find the market equil
- 1) If a good has a price elasticity of demand of -3, it implies that: If the price of the good increases by 1%, the quantity demanded of the good will decrease by 3%. If the price of the good increases by 3%, the quantity demanded of the good will incre
- The demand for a product tends to be elastic if: a. it is inexpensive. b. consumers are slow to respond to price changes. c. a small proportion of consumer's income is spent on the good. d. it has many substitutes.
- The elasticity that measures how sensitive the buyers of a good are to a change in the price of another good is called: a. price elasticity of demand b. income elasticity of demand c. cross-price elasticity of demand d. price elasticity of supply
- Suppose that the cross-price elasticity between good X and Y is -0.25 and that the price of good Y increases. Which of the following statements is true? A. Demand for good X goes down. B. Goods X and Y are demand substitutes. C. Revenue for the sel
- Suppose the income elasticity of demand of Good X is -3. This means that a 15% decrease in income would result in a ______________ in quantity demanded of Good X? a. 5% increase b. 5% decrease c. 45
- If the price of a good increases and the total revenue also increases, the good has a(n): a) inelastic demand. b) perfectly elastic demand. c) elastic demand. d) unit elastic demand.
- Total revenue will decrease, as the price of a good falls, if the price elasticity of demand for the good is: a. Elastic demand and the elasticity is greater than 1. b. Inelastic demand and the elasticity is greater than 1. c. Unit elastic demand. d. P
- If a firm decreases the price of a good and total revenue decreases, then A. the demand for this good is price elastic. B. the demand for this good is price inelastic. C. the cross-price elasticity is negative. D. the income elasticity is less than 1.
- Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. What is the income elasticity of demand for the good, and what type of good is it? a). negative, and therefore the good is an inferior good. b
- If the elasticity of demand for Good A is -3, a 33% decrease in quantity demanded of Good A results from a(n): a. 99% decrease in the price of Good A. b. 99% increase in the price of Good A. c. 11% decrease in the price of Good A. d. 11% increase in
- The elasticity that measures the responsiveness of consumer demand to changes in income is the: a. Income elasticity, b. Own price elasticity, c. Cross-price elasticity, d. Neither the income elasticity, the own-price elasticity, nor the cross-price elast
- The elasticity that measures the responsiveness of consumer demand to changes in income is the: a. income elasticity b. own-price elasticity c. cross-price elasticity d. neither the income elasticity, the own-price elasticity, nor the cross-price elastici
- If a good's income elasticity of demand is positive, this means: a. sales of the good are responsive to changes in price. b. sales of the good are responsive to changes in the price of another good. c. sales of the good fall when buyers' incomes increase.
- Price elasticity of demand for a good depends on the price of the good relative to consumers' incomes. Of the following goods, which one has the most elastic demand? a. Lighter fluid b. Pet food c. Refrigerator d. Thumbtacks
- If income increases from $50,000 to $60,000 while demand for a good increases from 100 units to 125 units, what is the income elasticity of demand? Is the good a normal good or an inferior good?
- If a good is inferior in an economic sense: a. it is demand price elastic. b. it is demand price inelastic. c. it is a low-quality good. d. the income elasticity of demand is negative.
- If the price elasticity of demand of a product is -5, and the income elasticity of demand for the product is 2.5. If a 0.5 % decrease in product price is accompanied by a 1% decrease in consumer income, the firm's total sales will be?
- Price elasticity of demand of a good is (-)1. At a price, the consumer buys 60 units of the good. How many units will the consumer buy if the price falls by 10%?
- Price elasticity for a good depends on the share of a consumer's budget spent on a good. Other things being equal, which of the following goods has the most elastic demand? 1.Computer 2. Salt 3. La
- As the percentage of the consumer's income accounted for by a particular good decreases, demand for the good will: a.) tend toward being perfectly elastic b.) tend to become closer to unit elastic c.
- The cross elasticity of demand for good X with respect to the price of good Y is negative. X is a normal good and Y is an inferior good. The supply of good X is perfectly elastic. A rise in income the equilibrium price of good X. a. might raise or lower b
- Which of the following would tend to increase the elasticity of demand for good X? a) A new discovery allows firms to produce X at a much lower cost. b) The percent of a consumer's income spent on good X declines. c) A new product, Y, which can be used in
- If the elasticity of demand for Good A is -3, a 33% decrease in quantity demanded of Good A results from a(n): a. 33% decrease in the price of Good A. b. 11% decrease in the price of Good A. c. 11% increase in the price of Good A. d. 99% increase in the p
- Given the following linear market demand for good 1 Q_1 = 1000 + 0.5M- 400P_1 + 200P_2 P_1 = $10 P_2 = $5 M (disposable income) = $2000 (a) Calculate the cross-price elasticity of demand? (b) Calculat
- If a good has an elasticity of demand of 21, then we say the good is: A) highly inelastic. B) unitary elastic. C) not elastic. D) highly elastic.
- 2) If cross-price elasticity of demand for Good X is equal to 0, what is the relationship between Good X and Good Y? 3) If the income elasticity of demand for a good is equal to -0.8, what information
- If the price of a good increases from $20 to $25 and the quantity demanded of a good decreases from 100 to 90, what is the elasticity of demand? Is the demand elastic, unit elastic, or inelastic? Use
- If the price elasticity of demand for a good is -4, then a 5% increase in price would result in __.
- Suppose Income Elasticity of Demand is 2. If this is the case, then: a. A 2% increase in income will decrease the quantity demanded by 1%, and this good is an inferior good. b. A 2% increase in income will decrease the quantity demanded by 1%, and this g
- If price elasticity of demand is -3.196, and income elasticity is 0.221, is this a normal good, a luxury good, or a necessity?
- If your income goes up by 2% and, in response, the quantity demanded of good x rises by 3%, the income elasticity of demand would be [{Blank}].
- If the price elasticity of demand for a product is greater than 1, then a. higher prices will increase demand for the good. b. consumers are relatively responsive to price changes. c. higher prices will reduce demand for the good. d. higher prices wil
- A normal good has a _____ income elasticity of demand and quantity demanded _____ as income rises. A. negative; decreases B. negative; increases C. positive; increases D. positive; decreases
- A 60% increase in price causes the quantity demanded of a good to decrease by 30%, while the total revenue of that good increases by 15%. The value for the price elasticity of demand is, and demand is. a. -0.5, elastic b. -0.5, inelastic c. -2, inelastic
- Total revenue falls as the price of a good is raised, if the demand for the good is: a. elastic. b. inelastic. c. unitary elastic. d. perfectly elastic.
- If the price elasticity of demand is greater than one, the good's demand is said to be
- The extended demand function of good X is given by Q_d^X = 1200 - 10P_X + 20P_Y + 0.2M where Q_d^X = quantity demanded of good X, P_X = price of good X, M = average consumer income, P_Y = price of related good Y (related in consumption of X) A. What is Q_
- If there are two goods and if income doubles and the price of good 1 doubles while the price of good 2 stays constant, a consumer's demand for good: a. 1 will increase only if it is a Giffen good for her. b. 2 will decrease only if it is a Giffen good f
- A normal good can be distinguished from an inferior good because a normal good has: a. a negative income elasticity of demand. b. a positive income elasticity of demand. c. a positive cross-price elasticity of demand. d. a positive price elasticity of dem
- Demand will be more elastic if 1.) better substitute goods exist. 2.) the amount spend on the good is a smaller proportion of consumer's income. 3.) the good is a necessity, not a luxury. 4.) the t
- 10. If own price elasticity of demand is -2, the demand for the good is characterized as ___________ and, to generate more revenue, the firm should marginally ___________ the price. (a) elastic; incre
Explore our homework questions and answers library
Browse
by subject