ECONOMICS
ELASTICITY OF DEMAND
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
How much the quantity bought of a good changes when the price of another good changes
|
|
|
How much labor supplied changes in response to change in wages
|
|
|
How much the quantity bought of a good changes when the buyers’ income change
|
|
|
How much the quantity bought of a good changes when its price changes
|
Detailed explanation-1: -Income elasticity of demand describes the sensitivity to changes in consumer income relative to the amount of a good that consumers demand. Highly elastic goods will see their quantity demanded change rapidly with income changes, while inelastic goods will see the same quantity demanded even as income changes.
Detailed explanation-2: -Income elasticity of demand measures the relationship between the consumer’s income and the demand for a certain good. It may be positive or negative, or even non-responsive for a certain product.
Detailed explanation-3: -Price elasticity of demand measures how much the quantity demanded responds to changes in the price. If a demand curve is elastic, total revenue falls when the price rises. If it is inelastic, total revenue rises as the price rises.
Detailed explanation-4: -Income demand is the functional demand for a commodity and level of income, it shows how much quantity of a commodity a consumer will buy at different levels of income.
Detailed explanation-5: -The income effect refers to a change in the quantity demanded of a good because of a change in the buyer’s real income. This is because the income effect is as a result of a change in the purchasing power for consumers. A change in the consumers’ purchasing power is usually caused by a change in the real income.