Asked by
Daisy Mendoza
on Dec 11, 2024
Verified
Suppose the value of income elasticity of demand for a private college education is equal to 1.5. This means that
A) every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education.
B) every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education.
C) a 10 percent increase in income causes a 15 percent increase in the quantity of private college education purchased.
D) a 15 percent increase in income causes a 10 percent increase in the quantity of private college education purchased.
E) a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent.
Income Elasticity
An assessment of the variation in consumer demand for a product or service based on fluctuations in the consumer's income.
- Distinguish between types of goods (normal, inferior, luxury) based on income elasticity of demand.
- Examine the relationship between income elasticity and consumer spending patterns on education and other goods.
Verified Answer
BD
Learning Objectives
- Distinguish between types of goods (normal, inferior, luxury) based on income elasticity of demand.
- Examine the relationship between income elasticity and consumer spending patterns on education and other goods.