Question

What does unitary income elasticity of demand (Ei=1) imply?

A An increase in income leads to a decrease in quantity demanded Correct Answer Incorrect Answer
B An increase in income leads to an equal increase in quantity demanded Correct Answer Incorrect Answer
C A decrease in income leads to an equal decrease in quantity demanded Correct Answer Incorrect Answer
D A decrease in income leads to a greater decrease in quantity demanded Correct Answer Incorrect Answer

Solution

Unitary income elasticity of demand (Ei=1) implies that a given proportionate rise in the consumer's money income is accompanied by an equally proportionate rise in the quantity demanded of a commodity, and vice versa.

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