```{r data generation, echo = FALSE, results = "hide"} # TRUE/FALSE solutions for answers (partly created with ChatGPT) sol <- rep(c(TRUE, FALSE), c(7, 10)) ## randomly invert solution to make cheating more difficult type <- sample(c("correct", "**not** correct"), 1) if(type != "correct") sol <- !sol ## randomly change wording for some answers (without consequences for correctness) dir_change1 <- sample(c("increases", "decreases"), 1) ext_change1 <- sample(1:3, 1) + c(0, sample(1:2, 1)) dir_change2 <- sample(c("increases", "decreases"), 1) ``` Question ======== Which of the following statements about the income elasticity of demand are `r type`? Answerlist ---------- * If the income elasticity of demand is positive, the good is said to be a normal good. * The income elasticity of demand indicates how strongly the demand for a good reacts to a change in income. * If the income `r dir_change1` by `r ext_change1[1]`% and thus the demand for a good `r dir_change1` by `r ext_change1[2]`%, it is called a luxury good. * If the income elasticity of demand is negative, one speaks of an inferior good. * The income elasticity of demand can be positive or negative. * A Giffen good is a special case of an inferior good where demand `r dir_change2` if the price of the good `r dir_change2`. * An income elasticity of demand equal to one means that the demand for the good increases proportional to the change in income. * The income elasticity of demand indicates how strongly the demand for a good responds to a change of the price. * If the income elasticity of demand is positive, the good is said to be inferior. * The income elasticity of demand is the same for all goods. * If the income elasticity of demand is zero, the good is called a luxury good. * If the income elasticity of demand is greater than one, the good is called a normal good. * The income elasticity of demand is the same for all consumers. * The income elasticity of demand is independent of the good's price. * The income elasticity of demand can range between zero and infinity. * Giffen goods are luxury goods for which the demand decreases as income increases. * Common goods are goods that are purchased preferentially by a certain part of the population. Solution ======== This question refers to the definition of income elasticity in Varian (2014, _Intermediate Microeconomics: A Modern Approach_, 9th ed.), Chapter 15. Meta-information ================ exname: Income elasticity extype: mchoice exsolution: `r mchoice2string(sol)` exshuffle: 5