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Theory of Demand
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Which of the following is incorrect?
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A
The income elasticity of demand is the percentage change in quantity demanded of a good due to a change in the price of a substitute.
💡 Explanation:
Option B is incorrect because income elasticity measures responsiveness to INCOME changes, not price of substitutes. Cross elasticity (not income elasticity) measures response to substitute price changes. Options A, C, and D are correct statements: substitutes have positive cross elasticity, complements have negative cross elasticity, and price elasticity is normally negative (price up, quantity down) except Giffen goods where it's positive.