Consider the following multiplicative demand function where QD = quantity demanded,P = selling price,and Y = disposable income: The coefficient of Y indicates that (all other things being held constant) :
A) for a one percent increase in disposable income,quantity demanded would increase by .2 percent
B) for a one unit increase in disposable income,quantity demanded would increase by .2 units
C) for a one percent increase in disposable income quantity demanded would increase by .2 units
D) for a one unit increase in disposable income,quantity demanded would increase by .2 percent
E) none of the above
Correct Answer:
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