Suppose that income increases and the quantity demanded of guitars stays the same. This means that the income elasticity of guitars is unit elastic.

Question

Quizplus · Accepted Answer

If the quantity demanded of guitars stays the same despite an increase in income, it means that guitars are an inferior good. In this case, the income elasticity of demand for guitars is negative, meaning that a change in income results in a proportionately larger change in quantity demanded. Therefore, the income elasticity of guitars is not unit elastic, but rather it is elastic.

Suppose That Income Increases and the Quantity Demanded of Guitars