Consider the following multiplicative demand function where QD = quantity demanded, P = selling price, and Y = disposable income:QD = 1.6P - 1.5Y2 The coefficient of Y (i.e., .2) indicates that (all other things being held constant) :
A) for a one percent increase in disposable income, quantity demanded would increase by .2 percent
B) for a one unit increase in disposable income, quantity demanded would increase by .2 units
C) for a one percent increase in disposable income quantity demanded would increase by .2 units
D) for a one unit increase in disposable income, quantity demanded would increase by .2 percent
E) none of the above
Correct Answer:
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