CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

Average income increases from $20,000 p.a. to $22,000 p.a. Quantity demanded per year increases from 5000 to 6000 units. Which of the following is correct?
A. Demand is price inelastic.
B. Income elasticity is -2.
C. The product is normal.
Explanation: The percentage change in demand is +20%; the percentage change in income is +10%. This means the product is normal, because demand rises with more income and has an income elasticity of +2.

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