If the income elasticity of demand for good smartphone apps is 5 and the percent

Question

If the income elasticity of demand for good smartphone apps is 5 and the percentage change in income is 10 percent, what is the percentage change in the quantity consumed? O -5 percent O 50 percent O0.5 percent O -0.5 percent O 2 percent D! ??2 2 A When the price elasticity of demand is elastic, a consumer is O completely unresponsive to a change in price. O relatively responsive to a change in price. O relatively unresponsive to a change in price. O completely responsive to a change in price. O unaffected by a change in price.

Explanation / Answer

1)

Right answer is : 50 Percent .

Since the value of income elasticity is 5 which means 1 percent change in income will lead to change in demand by 5 %. Thus, 10 % change in income would cause 50 % change in demand.

2)

Right answer is : completely responsive to change in price.

Elastic demand means elasticity of demand which is greater than one.

3)

Right answer is : Luxury; Necessity.

Since in first case income elasticity of income is very higher, thus is luxury and in second case, consumer is relatively less sensitive change in income, thus it is necessity.

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