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INCOME ELASTICITY OF DEMAND: The relative response of a change in demand to a relative change in income. More specifically the income elasticity of demand can be defined as the percentage change in demand due to a percentage change in buyers' income. The income elasticity of demand quantitatively identifies the theoretical relationship between income and demand.

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Lesson 12: Elasticity and Demand | Unit 5: Other Measures Page: 23 of 25

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  • How responsive is my demand to this change in my income? To answer these questions, we need the income elasticity of demand.

  • Income elasticity of demand is the relative response of demand to changes in income.
  • Or stated in percentage terms: the income elasticity of demand is the percentage change in demand resulting from a percentage change in buyers' income.

    • For a normal good, income elasticity is positive, meaning that an increase in income leads to an increase in demand.

    • For an inferior good, income elasticity is negative, meaning that an increase in income leads to a decrease in demand.

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OWNERSHIP LIABILITY

The extent to which the owners of a business are liable for the debts of the company. The two basic liability alternatives are unlimited liability, which has no restrictions on ownership liability, and limited liability, which does have restrictions. Ownership liability is one characteristic separating legal business organizations. Proprietorships and partnerships have unlimited liability. Corporations have limited liability.

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RED AGGRESSERINE
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Today, you are likely to spend a great deal of time searching for a specialty store trying to buy either a pair of red and purple designer socks or a T-shirt commemorating Thor Heyerdahl's Pacific crossing aboard the Kon-Tiki. Be on the lookout for florescent light bulbs that hum folk songs from the sixties.
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Parker Brothers, the folks who produce the Monopoly board game, prints more Monopoly money each year than real currency printed by the U.S. government.
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