A change in the distribution of income which leaves total income constant will not shift the market demand curve for a product providing
A) everyone has an income elasticity of demand of zero for the product.
B) everyone has the same income elasticity of demand for the product.
C) individuals have differing income elasticities for the product, but the average income elasticity for income gainers is equal to the average income elasticity for income losers.
D) any of the above conditions occur.

Question

Quizplus · Accepted Answer

A change in the distribution of income will not shift the market demand curve if the average income elasticity of demand for income gainers is equal to the average income elasticity for income losers. This is because the increase in demand from income gainers will be offset by the decrease in demand from income losers, leaving total demand unchanged.

A Change in the Distribution of Income Which Leaves Total