Question : The responsiveness of demand to income is defined as:
Option 1: Quantity is demanded in response to a change in income.
Option 2: Demanded quantity in response to a price change.
Option 3: Price in response to a change in income.
Option 4: Income as a result of a change in quantity demanded
Answer (1)
25th Jan, 2024
Correct Answer: Quantity is demanded in response to a change in income.
Solution :
The responsiveness of the quantity demanded a good or service to a change in the income of the people demanding the good is measured by the income elasticity of demand. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
Option a is the correct option.
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