"Income elasticity of demand is always positive." Do you agree or disagree? Explain
What will be an ideal response?
Disagree. Income elasticity of demand can be positive or negative. For normal goods, an increase in income results in an increase in demand. For inferior goods, however, an increase in income results in a decrease in demand.
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When comparing partial-equilibrium effects to general-equilibrium effects, one can conclude that
A) general-equilibrium effects are always larger. B) partial-equilibrium effects are always larger. C) the effects are of equal size. D) one cannot determine before the fact which effect is greater.
If the price of a cola increased by 12% and consumers responded by purchasing 20% less cola, the absolute value of price elasticity of demand for cola would be
A) 0.20. B) 0.80. C) 1.67. D) 2.40.
External costs are
A) borne by individuals other than those who incurred them. B) another term for implicit costs. C) borne by the public but incurred by the government. D) borne by the government but incurred by the public.
What is the defining characteristic of a natural monopoly? Give an example of a natural monopoly