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Subject - Economics:

Microeconomics

MCQ - 17-4027

Question:

You are told that the income elasticity for DVDs is + 1.5. This means that

  1. a 10 percent increase in income produces a 15 percent increase in consumption of DVDs. DVDs are a normal luxury good.
  2. a 10 percent increase in income produces a 15 percent increase in consumption of DVDs. DVDs are an inferior good.
  3. a 10 percent increase in income produces a 15 percent decrease in consumption of DVDs. DVDs are an inferior good.
  4. a 10 percent increase in income produces a 15 percent increase in consumption of DVDs. DVDs are an inferior good.
  5. a 10 percent increase in the price of DVDs produces a 15 percent decrease in consumption of DVDs. DVDs are a price inelastic good.

Correct Answer: A

Explanation:

When E I > 0, it is a normal good. When E I > 1, it is a luxury good.

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269 MCQ for effective preparation of the test of Microeconomics of Economics section.

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