Question

Income elasticity of demand measure consumers' sensitivity to the change in price of another good.

a) true
b) false

Answer 1

True. Income elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in income.

Step-by-step explanation:

True. Income elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in income. It shows how sensitive consumers are to changes in income when making purchasing decisions. If the income elasticity of demand is positive, it means that an increase in income will lead to an increase in the quantity demanded, indicating a normal good. On the other hand, if the income elasticity of demand is negative, it means that an increase in income will lead to a decrease in the quantity demanded, indicating an inferior good.