Author Question: Suppose the income elasticity of demand for a private college education is equal to 1.5 . This means ... (Read 69 times)

sarasara · **on:** Jul 1, 2018

Suppose the income elasticity of demand for a private college education is equal to 1.5 . This means that
a. every 1 increase in income provides an incentive for a 1.50 increase in expenditures on private college education
b. every 1.50 increase in income provides an incentive for a 1 increase in expenditures on private college education
c. a 10 percent increase in income causes a 15 percent increase in the demand for a private college education
d. a 15 percent increase in income causes a 10 percent increase in the demand for a private college education
e. a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent

Question 2

For which of the following medical goods or services is the income elasticity of demand likely to be largest?
a. emergency services after a car accident
b. measles shots
c. physical examinations for life insurance applications
d. medical tests to diagnose specific symptoms
e. face-lifts