Income Elasticity of Demand 1 - A Level Economics MCQ Quiz

Question 1/12

A household's monthly income rises from £2,000 to £2,400. As a result, their monthly spending on restaurant meals rises from £150 to £210. What is their income elasticity of demand for restaurant meals?

-2.0 0.2 0.5 1.2 2.0

Question 2/12

A household's weekly income rises from £400 to £480. As a result, their weekly spending on instant noodles falls from £12 to £9. What is their income elasticity of demand for instant noodles?

-2.25 -1.25 -0.8 -0.25 1.25

Question 3/12

The income elasticity of demand for own-brand baked beans is -0.5. Weekly sales are currently 40,000 tins. If household incomes rise by 6%, what would the new weekly sales level be?

37,600 38,800 39,400 40,000 41,200

Question 4/12

The income elasticity of demand for a good is 1.8. A rise in income from £250 caused demand to rise from 6,000 to 7,080 units. What was the new level of income?

£262.50 £270 £275 £295 £325

Question 5/12

The income elasticity of demand for a good is 2. Which one of the following statements is correct?

A 30% increase in income leads to a 15% increase in demand. Demand for the good is income inelastic. A 15% increase in price leads to a 30% fall in demand. The good is an inferior good. A 15% increase in income leads to a 30% increase in demand.

Question 6/12

The income elasticity of demand for taxi journeys is -0.8. This means that

taxi journeys are a normal good. taxi journeys have a negative cross elasticity of demand. taxi journeys are an inferior good. as household incomes rise, more people will choose to travel by taxi. a 10% rise in income leads to an 8% rise in demand for taxi journeys.

Question 7/12

Which one of the following best defines an inferior good?

A good that has many close substitutes. A good with a positive income elasticity of demand. A good with a negative cross elasticity of demand. A good with a positive price elasticity of demand. A good with a negative income elasticity of demand.

Question 8/12

Which one of the following best defines a normal good?

A good with a negative income elasticity of demand. A good with a positive income elasticity of demand. A good with a positive cross elasticity of demand. A good with a negative price elasticity of demand. A good that has no close substitutes.

Question 9/12

A household's weekly demand for four goods, at two different income levels, is shown in the table below.

	Income £500	Income £600
Good A	10	11
Good B	20	24
Good C	15	17
Good D	8	7

When income rises from £500 to £600, for which good does the household have an income elasticity of demand of unity (1)?

Good A Good B Good C Good D Cannot be determined from the data

Question 10/12

A department store has estimated the income elasticity of demand for some of its product lines, as shown in the table below.

Product	Income elasticity of demand
Furniture	1.8
Electronics	0.9
Toys	0.45
Groceries	0.3
Cleaning products	-0.5

If customer incomes rise by 4%, for which of these product lines will quantity demanded rise by more than 2%?

Furniture only Cleaning products only Toys and groceries Furniture and electronics Electronics and toys

Question 11/12

As incomes in a country rise, demand for streaming subscriptions increases, while demand for DVD rentals decreases. It can therefore be concluded that

DVD rentals and streaming subscriptions must be complements. streaming subscriptions have a higher price elasticity of demand than DVD rentals. DVD rentals are an inferior good while streaming subscriptions are a normal good. there is a negative cross price elasticity of demand between streaming subscriptions and DVD rentals. streaming subscriptions have an income elasticity of demand that is income inelastic while DVD rentals are income elastic.

Question 12/12

A study found that a $1 rise in household income leads to an extra $0.60 of spending on public transport in a lower-income country, but only an extra $0.05 of spending on public transport in a higher-income country. Which one of the following can be concluded from the data?

Public transport is a substitute good in the higher-income country. Demand for public transport is more income inelastic in the higher-income country than in the lower-income country. Public transport is an inferior good in the lower-income country. Demand for public transport is more price elastic in the lower-income country than in the higher-income country. Public transport is an inferior good in the higher-income country.