Consider the following multiplicative demand function where QD = quantity demanded, P = selling price, and I = disposable income:

QD = 1.6 P^-1.5Y^.2

QD = 1.6 P ^-1.5y.2
           
The coefficient of I indicates that (all other things being held constant):

		for a one percent increase in disposable income, quantity demanded would increase by .2 percent, indicating that this good a necessity
		for a one percent increase in disposable income, quantity demanded would increase by .2 percent, indicating that this good is a luxury
		for a one percent increase in disposable income, quantity demanded would increase by .2 percent, indicating that this good is inferior
		for a one percent increase in disposable income, quantity demanded would increase by .2 percent, indicating that this good is inelastic please show how you come up with the answer , do not just guess !!!

 

Answer rating: 100% (QA)

Consider the following multiplicative demand function where QD quantity ... View the full answer