Questions
Single choice
If the income elasticity of demand for airline tickets is 1.8, this implies that:
Options
A.Airline tickets are an inferior good
B.Airline tickets are a necessity
C.Airline tickets are a luxury good
D.Demand for airline tickets is independent of income
View Explanation
Verified Answer
Please login to view
Step-by-Step Analysis
To start, restate the key concept: income elasticity of demand (YED) measures how quantity demanded responds to changes in income. An elasticity of 1.8 is positive and greater than 1, which has specific implications for the category of goods involved.
Option 1: 'Airline tickets are an inferior good.' Inferior......Login to view full explanationLog in for full answers
We've collected over 50,000 authentic exam questions and detailed explanations from around the globe. Log in now and get instant access to the answers!
Similar Questions
Two complements , shoes and socks will have a negative value of income elasticity of demand.
(a) Jim has $10,000 to deposit. Bank Altos offers 1.5 per cent interest compounded annually, while Bank Santos offer 1.25 per cent interest compounded monthly. (i) Determine the future value of investing $10,000 in Bank Altos after 4 years. [2 marks] (ii) Determine the present value of investing $10,000 in Bank Santos over 4 years. [1 mark] (iii) Which bank should Jim choose if Jim wants the highest return after 4 years? [2 marks] (b) Consider the demand function where Q is quantity demanded, P is price, and I is income. (i) Compute partial income elasticity of demand. [2 marks] (ii) Interpret partial income elasticity of demand obtained in part (i). [1 mark][Fill in the blank]
(a) Jim has $10,000 to deposit. Bank Altos offers 1.5 per cent interest compounded annually, while Bank Santos offer 1.25 per cent interest compounded monthly. (i) Determine the future value of investing $10,000 in Bank Altos after 4 years. [2 marks] (ii) Determine the present value of investing $10,000 in Bank Santos over 4 years. [1 mark] (iii) Which bank should Jim choose if Jim wants the highest return after 4 years? [2 marks] (b) Consider the demand function where Q is quantity demanded, P is price, and I is income. (i) Compute partial income elasticity of demand. [2 marks] (ii) Interpret partial income elasticity of demand obtained in part (i). [1 mark][Fill in the blank]
Part 1When income increases by 55 percent and all prices remain the same, the quantity of smartphones demanded increases by 1010 percent. Calculate the income elasticity of demand of smartphones. Part 1The income elasticity of demand of smartphones is [input]enter your response here . >>> If your answer is negative, include a minus sign. If your answer is positive, do not include a plus sign.
More Practical Tools for Students Powered by AI Study Helper
Making Your Study Simpler
Join us and instantly unlock extensive past papers & exclusive solutions to get a head start on your studies!