Income Elasticity of Demand MCQs

What does a positive income elasticity of demand indicate?

• Normal good
• Inferior good
• Substitute good
• Complementary good

If the income elasticity of demand for a car is 2, how would you classify this good?

• Normal good
• Inferior good
• Luxury good
• Substitute good

How is income elasticity of demand calculated?

• Percentage change in quantity demanded divided by percentage change in price
• Percentage change in quantity demanded divided by percentage change in income
• Percentage change in price divided by percentage change in quantity demanded
• Percentage change in income divided by percentage change in quantity demanded

An income elasticity of demand value of 0.5 implies:

• Normal good
• Inferior good
• Luxury good
• Necessity

What does a zero income elasticity of demand signify?

• Perfectly elastic demand
• Perfectly inelastic demand
• Unitary elastic demand
• No relationship between income and quantity demanded

If the income elasticity of demand for a good is -0.4, what type of good is it?

• Normal good
• Inferior good
• Luxury good
• Giffen good

George, Elsie, and Amelia run a luxury car dealership. They noticed that the demand for their luxury cars increased from 200 to 280 units when the average income of their customers rose from £50,000 to £60,000. What is the income elasticity of demand for their luxury cars?

• 0.5

• 1

• 2

• 4

The quantity demanded for an inferior good decreases from 300 to 240 units when consumer income increases from £20,000 to £25,000. What is the income elasticity of demand?

• -0.2

• -0.4

• -0.6

• -0.8