"The income elasticity of a good is positive if a consumer increases the total spending on that good as a result of an increase in its market price." Do you agree or disagree? Why?
What will be an ideal response?
Disagree. If a consumer increases the total spending on a good when the price of that good increases, then the good will have a price inelastic demand. The income elasticity of a good is positive if its demand increases as result of an increase in income.
You might also like to view...
In many corporations, there is "separation of ownership from control." What does this mean?
A) The board of directors controls corporate operations, although the managers of the corporation own the corporation. B) Top corporate managers only make decisions that have been approved unanimously by shareholders. C) The shareholders control the corporation, although the board of directors owns the corporation. D) The managers of the corporation run the corporation, although the shareholders own the corporation.
A manager is considering investing in a new piece of equipment. The equipment cost $50,000 and the manager will finance the full amount of the cost over three years at an interest rate of 4 percent. In the third year, the manager will repay the entire principal of the loan plus the year's annual interest, after making interest-only payments for the first two years. The equipment will generate
$30,000 in future operating profit each of the three years and has a salvage value of zero at the end of the three years. The tax rate on the firm's profit is 8 percent each year. What is the net present value of the investment? A) $27,036 B) $20,589 C) $32,598 D) $35,852
Limits of special-interest contributions to national political campaigns
a. would reduce the extent of rent seeking b. would involve concentrated costs and concentrated benefits c. are a form of rational ignorance d. would heighten the advantage of incumbency e. would heighten the advantage of challengers
If you were the Chairman of the Fed and faced inflation, you would most likely
a. increase commercial bank reserves by raising the discount rate b. increase commercial bank reserves by buying government securities c. decrease commercial bank reserves by lowering the discount rate d. decrease commercial bank reserves by selling government securities e. decrease commercial bank reserves by lowering the legal reserve requirement