{"id":245481,"date":"2025-07-06T08:17:35","date_gmt":"2025-07-06T08:17:35","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=245481"},"modified":"2025-07-06T08:17:37","modified_gmt":"2025-07-06T08:17:37","slug":"a-10-percent-decrease-in-income-decreases-the-quantity-demanded-of-cds-by-3-percent","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/07\/06\/a-10-percent-decrease-in-income-decreases-the-quantity-demanded-of-cds-by-3-percent\/","title":{"rendered":"A 10 percent decrease in income decreases the quantity demanded of CDs by 3 percent"},"content":{"rendered":"\n<p>A 10 percent decrease in income decreases the quantity demanded of CDs by 3 percent. The income elasticity of demand for CDs is Select one: ? <\/p>\n\n\n\n<p>a. -0.3 ? <\/p>\n\n\n\n<p>b. 0.3 ? <\/p>\n\n\n\n<p>c. 3.3 ? <\/p>\n\n\n\n<p>d. 10<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\">The correct answer and explanation is:<\/mark><\/strong><\/p>\n\n\n\n<p>The correct answer is <strong>a. -0.3<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<p>Income elasticity of demand (YED) measures how the quantity demanded of a good responds to a change in consumer income. It is calculated using the formula: YED=%&nbsp;change&nbsp;in&nbsp;quantity&nbsp;demanded%&nbsp;change&nbsp;in&nbsp;incomeYED = \\frac{\\%\\text{ change in quantity demanded}}{\\%\\text{ change in income}}<\/p>\n\n\n\n<p>Here, we are given that a 10% decrease in income leads to a 3% decrease in the quantity demanded of CDs.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The percentage change in quantity demanded is -3% (a decrease).<\/li>\n\n\n\n<li>The percentage change in income is -10% (a decrease).<\/li>\n<\/ul>\n\n\n\n<p>Substituting these values into the formula: YED=\u22123%\u221210%=0.3YED = \\frac{-3\\%}{-10\\%} = 0.3<\/p>\n\n\n\n<p>However, because a decrease in income leads to a decrease in demand for a normal good, the income elasticity of demand is negative. Therefore, the correct answer is <strong>-0.3<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Further Explanation:<\/h3>\n\n\n\n<p>Income elasticity of demand can be classified as follows:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Positive YED<\/strong>: If the elasticity is positive, the good is a <strong>normal good<\/strong> (demand increases as income increases).<\/li>\n\n\n\n<li><strong>Negative YED<\/strong>: If the elasticity is negative, the good is an <strong>inferior good<\/strong> (demand decreases as income increases).<\/li>\n<\/ul>\n\n\n\n<p>In this case, since the YED is negative, CDs are considered a <strong>normal good<\/strong> (in most cases, demand for such goods falls as income decreases).<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A 10 percent decrease in income decreases the quantity demanded of CDs by 3 percent. The income elasticity of demand for CDs is Select one: ? a. -0.3 ? b. 0.3 ? c. 3.3 ? d. 10 The correct answer and explanation is: The correct answer is a. -0.3. Explanation: Income elasticity of demand (YED) [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-245481","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/245481","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=245481"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/245481\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=245481"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=245481"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=245481"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}