Question

Over time, technological advance increases consumers' incomes and reduces 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 if the price elasticity of demand is greater than _____.
a. zero, zero
b. zero, one
c. one, zero
d. one, one

Answer 1

Answer: Zero, one.

Explanation:

Consumers would spend more on electronic devices if the income elasticity of demand is greater than zero, and the price elasticity of demand is greater than one. If the income elasticity of demand of product is greater than zero, demand rises with increase in income and if the price elasticity is greater than one, consumers are more responds positively to changes in price.