ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a 8% increase in income might lead to a 10% rise in the demand for new kitchens.
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normal luxury
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inferior
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normal necessity
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None of the above
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Explanation:
Detailed explanation-1: -Luxury goods and services have an income elasticity of demand > +1 i.e. demand rises more than proportionate to a change in income – for example a 8% increase in income might lead to a 10% rise in the demand for new kitchens. The income elasticity of demand in this example is +1.25.
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