The income elasticity of demand for peaches has been estimated to be 1.43.If income grows by 15%,all other things unchanged,total revenue will:
A)rise.
B)fall.
C)remain unchanged.
D)The information is insufficient to answer the question.

Question

Quizplus · Accepted Answer

The income elasticity of demand for peaches being 1.43 indicates that peaches are a normal good (as income and demand move in the same direction). 
If income grows by 15%, the quantity of peaches demanded will increase as people have more purchasing power. 
Since the income elasticity is greater than 1, the percentage increase in quantity demanded will be greater than the percentage increase in income. 
Therefore, total revenue will increase, as the increase in quantity demanded will more than offset the decrease in the price of peaches due to an increase in supply.

The Income Elasticity of Demand for Peaches Has Been Estimated