Which of the following statements about income elasticity is correct?
A) Income elasticity in the short-run is greater than in the long-run.
B) Income elasticity in the long-run is greater than in the short-run.
C) Income elasticity is the same in the short-run and the long-run.
D) There is no clear relationship between the short-run and the long-run.

Question

Quizplus · Accepted Answer

Income elasticity in the long-run is generally greater than in the short-run because consumers have more time to adjust their consumption habits as their income changes. Over time, they may choose to buy more of a good if their income increases or less if their income decreases, reflecting a greater responsiveness or elasticity to income changes.

Which of the Following Statements About Income Elasticity Is Correct