Assume That We Have a Demand Curve of the Form

question 6

Multiple Choice

Assume that we have a demand curve of the form:
Log(Q) = a - b log(P) + c log(I)
Where Q = quantity, P = price, I = income, and a, b, and c are positive constants. The income and price elasticities for the demand curve represented above are always

• A) equal to one.
• B) equal to zero.
• C) equal (i.e., income elasticity always equals price elasticity).
• D) constant but not necessarily equal to one another.

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Definitions:

Balance Sheet

A report detailing a business's assets, debts, and owner's equity at a particular moment, offering a glimpse into its financial health.

Income Statement

A financial statement that shows a company's revenues and expenses, and profits or losses over a specific period of time.

Relationship of Net Income to Net Sales

A profitability metric that measures the percentage of net sales that ultimately becomes net income, indicating the efficiency of a company in generating profit from sales.

Net Income

The total earnings of a company after all expenses and taxes have been subtracted from total revenue.