Suppose the "Poor" and "Rich" Have Identical Demand Functions for Good

question 53

Multiple Choice

Suppose the "poor" and "rich" have identical demand functions for good X but only differ in income (I) $q _ { X } = 1000 + I - 50 P _ { X } - 20 P _ { Y }$ .At a given price of X,the price elasticity of their individual demand curves is such that?

• A)the rich person's demand is more elastic than the poor person's.
• B)the poor person's demand is more elastic than the rich person's.
• C)the poor person's demand is as elastic as the rich person's.

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Definitions:

Unit Price

The cost per unit of volume or weight of a product, allowing for easier comparison of costs between different sized packages of the same item.

Marginal Revenue Curve

A graphical representation that shows how the revenue changes when additional units are sold, illustrating the relationship between quantity sold and revenue.

Purely Competitive Firm

An entity operating in a market that features a high level of competition and no significant barriers to entry, leading to no single firm influencing market prices.

Market Price

The existing selling or buying price for an asset or service in the specified market.