As incomes rise, people allocate a growing share of their money to buying manufactured goods and services, the value of which depends on the knowledge or technology applied to them. This is known as _____________________.

Question

Quizplus · Accepted Answer

Income elasticity of demand refers to how the demand for goods and services changes in response to changes in consumers' income. As incomes rise, people often spend a larger proportion of their income on goods and services that are not basic necessities, which typically involve more advanced technology or knowledge in their production.

As Incomes Rise, People Allocate a Growing Share of Their