ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Question 10The demand for food is most elastic in countries ____
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with intermediate income levels
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that are highly urbanized
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with high income levels
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with low income levels
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Explanation:
Detailed explanation-1: -Often, it takes time for people to adjust their purchasing habits as incomes rise, and long-run income elasticity allows for such dynamic effects. Most categories in packaged food have income elasticity of 0.1 to 0.5, which means that they are inelastic.
Detailed explanation-2: -Income elasticity of demand for particular items therefore varies widely depending on income levels. While YED for food is about 0.15–0.20 in more developed countries, it is about 0.8 in poor countries.
Detailed explanation-3: -The income elasticity of food demand measures the percent change in the consumption of total food or a certain food item or group of food items to a percent change in the real income of consumers.
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