Question

Coefficients of income elasticity of demand provide insights into the economy.

a) true
b) false

Answer 1

The coefficients of income elasticity of demand provide insights into the economy.

Step-by-step explanation:

The statement is true. The coefficients of income elasticity of demand provide insights into the economy. Income elasticity of demand measures the responsiveness of the quantity demanded of a good to changes in income.

A positive income elasticity indicates a normal good, where a rise in income leads to an increase in demand. On the other hand, a negative income elasticity indicates an inferior good, where a rise in income leads to a decrease in demand.