Suppose a 4 percent increase in income results in a 2 percent ...

[abarnes]

Suppose a 4 percent increase in income results in a 2 percent decrease in the quantity demanded of a good. Calculate the income elasticity of demand for the good and determine what type of good it is.
 
  What will be an ideal response?

Question 2

Adverse selection is a situation in which one party to an economic transaction has less information than the other party.
 
  Indicate whether the statement is true or false

[scottmt]

Answer to Question 1

Income elasticity of demand = -0.5. The good is inferior.

Answer to Question 2

FALSE