📚 Learning Guide
Elasticity Formulas and Relationships
easy

Price elasticity of demand is to sensitivity of quantity demanded as income elasticity is to what?

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Learning Path

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Choose the Best Answer

A

Sensitivity of quantity supplied

B

Sensitivity of consumer income

C

Sensitivity of demand to price changes

D

Sensitivity of demand to changes in consumer preferences

Understanding the Answer

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Answer

Price elasticity of demand measures how much the quantity demanded of a good changes when its price changes. In a similar way, income elasticity of demand looks at how the quantity demanded changes when consumer income changes. Essentially, while price elasticity focuses on price changes, income elasticity focuses on changes in income levels. For example, if a person's income increases, they might buy more luxury items, showing a positive income elasticity. So, just as price elasticity relates to sensitivity to price changes, income elasticity relates to sensitivity to changes in income.

Detailed Explanation

Income elasticity measures how much the quantity demanded changes when consumer income changes. Other options are incorrect because This option confuses supply with demand; This option mixes up price changes with income changes.

Key Concepts

Price elasticity of demand
Income elasticity
Consumer behavior
Topic

Elasticity Formulas and Relationships

Difficulty

easy level question

Cognitive Level

understand

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