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- Subject
- Supply and Demandeconomics-mcqs › supply-and-demand
- Published
- 29 May 2019
- Last updated
- 28 May 2026
If the income elasticity of demand is +2 and income rises by 20%, what will be the new sales volume given the initial sales were 5,000 units?
Multiple choice question for Supply and Demand. Select an option, then review the explanation below.
Explanation
With an income elasticity of +2 and a 20% increase in income, sales will increase by 2 × 20% = 40%. Therefore, new sales = 5,000 × (1 + 0.40) = 7,000 units.
More Supply and Demand MCQs
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- 3.How does an increase in marginal cost affect output, and how does an increase in marginal revenue impact output?
- 4.Marginal revenue refers to the ________ resulting from producing an additional ________ of output.
- 5.What are firms generally assumed to do with their costs and profits?