Suppose That the Price Elasticity of Demand for a Product

question 36

Multiple Choice

Suppose that the price elasticity of demand for a product is -1 and that the price elasticity of supply is +1.Assume also that the income elasticity of demand is +2.Then an increase in income of 10% will raise equilibrium price by

• A)10%.
• B)5%.
• C)20%.
• D)an annual amount that cannot be determined.