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Author Question: What can income elasticity of demand tell us about the nature of a good? What will be an ideal ... (Read 17 times)

mmm

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on: Jun 29, 2018
What can income elasticity of demand tell us about the nature of a good?
 
  What will be an ideal response?

Question 2

If the current unemployment rate is 5, under which of the following circumstances would you expect the Fed to use contractionary monetary policy?
 
  A) if the inflation rate is above 5
  B) if the inflation rate is below 5
  C) if the natural rate of unemployment is below 5
  D) if the natural rate of unemployment is above 5


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jlaineee

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Reply #1 on: Jun 29, 2018
Answer to Question 1

The income elasticity of demand for a good equals the percentage change in quantity demanded of a good due to a percentage change in the consumer's income. Using income elasticity, products can be classified as normal goods or inferior goods. Goods with an income elasticity above 1 are called luxury goods. An income elasticity which is above 0 but less than 1 indicates that the good is normal. Inferior goods will have a negative income elasticity.

Answer to Question 2

D


mmm

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Reply 2 on: Jun 29, 2018
Excellent

blakcmamba

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Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

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