The income elasticity of demand is the degree to which
A) a change in demand alters the cost for a particular product.
B) rising import prices relative to export prices yields deteriorating terms of trade.
C) a change in income alters the demand for a particular product.
D) rising export prices relative to import prices yields deteriorating terms of trade.
E) rising export prices relative to import prices yields improving terms of trade.

Question

Quizplus · Accepted Answer

Income elasticity of demand is a measure of how responsive the demand for a product is to a change in income. It measures the percentage change in the quantity demanded of a good or service in response to a change in the income of the people buying the good or service. Therefore, option C is the correct choice as it explains the relationship between changes in income and demand.

The Income Elasticity of Demand Is the Degree to Which