Over time, technological advances increase consumers’ incomes and reduce the price of smartphones. Each of these forces increases the amount consumers spend on smartphones if the i... Over time, technological advances increase consumers’ incomes and reduce the price of smartphones. Each of these forces increases the amount consumers spend on smartphones if the income elasticity of demand is greater than _________ and the price elasticity of demand is greater than _________.
Understand the Problem
The question is asking about the thresholds for income elasticity of demand and price elasticity of demand that cause an increase in consumer spending on smartphones given advances in technology and changes in income and prices.
Answer
Zero for income elasticity and one for price elasticity.
The final answer is zero for the income elasticity of demand and one for the price elasticity of demand.
Answer for screen readers
The final answer is zero for the income elasticity of demand and one for the price elasticity of demand.
More Information
A positive income elasticity of demand (greater than zero) indicates that as income rises, spendings on the product increase, making it a normal good. A price elasticity of demand greater than one suggests elastic demand, where a decrease in price increases total spending.
Tips
A common mistake is mixing up the concepts of income and price elasticity or reversing their thresholds.
Sources
- Over time, technological advance increases consumers incomes ... - homework.study.com
- Over time, technological advance increases consumers' incomes ... - homework.study.com
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