Average income increase from Rs20,000 p.a to Rs 22,000 p.a Quantity demanded per year increases 5000 to 6000 units. Which of the following is correct ?
Correct answer: D. The product is normal
- A. Demand is price inelastic
- B. The good is inferior
- C. Income elasticity is -2
- D. The product is normal
Explanation
Income rises by 10% and quantity demanded rises by 20%, giving positive income elasticity of +2. A good whose demand increases with income is a normal good.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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