Practice Quiz

CLEP Management

Category - CLEP Management

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Which of the following is a measure of how demand for a good changes with people’s income?
  1. Income elasticity of demand
  2. Double marginalization
  3. Consumer Confidence Index
  4. Cost based pricing
Explanation
Answer: Income elasticity of demand measures how the quantity demanded changes when income increases. Luxury goods are highly income elastic, while staples such as basic food and clothing or less income elastic.

Key Takeaway: Understanding how a good is treated by consumers in a dynamic economy is essential in management.
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