A Simple Linear Demand Function May Be Stated as Q

question 2

Multiple Choice

A simple linear demand function may be stated as Q = a - bP + cI where Q is quantity demanded, P is the product price, and I is consumer income. To compute an appropriate value for b, we can use observed values for Q and P and then set -b(P/Q) equal to the:

• A) income elasticity of demand.
• B) cross-price elasticity of demand.
• C) price elasticity of demand.
• D) price elasticity of supply.

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