ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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For cola it is less than 1.
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For cola it is greater than 1.
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For nuts it is greater than 1.
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For nuts it is zero.
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Detailed explanation-1: -Key Takeaways. Income elasticity of demand is an economic measure of how responsive the quantity demanded for a good or service is to a change in income. The formula for calculating income elasticity of demand is the percentage change in quantity demanded divided by the percentage change in income.
Detailed explanation-2: -Unitary: The positive income elasticity is unitary when the change in product demand equals the change in consumer income. For example, if the consumer income rose by 15% and the demand for purchasing cars rose by 15%, the income elasticity of demand would be equal to one.
Detailed explanation-3: -Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. Income elasticity of measures the responsiveness of quantity demand to a change in income. Cross price elasticity of demand measures the responsiveness of quantity demanded for good A to the change in the price of good B.