question archive As the percentage of the consumer's income accounted for by a particular good decreases, demand for the good will: a

As the percentage of the consumer's income accounted for by a particular good decreases, demand for the good will: a

Subject:EconomicsPrice:2.88 Bought3

As the percentage of the consumer's income accounted for by a particular good decreases, demand for the good will:

a.)tend toward being perfectly elastic

b.)tend to become closer to unit elastic

c.)tend to become more price inelastic

d.)tend to become more price elastic

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When proportion of consumer?s income for some good decrease then demand of the good will tend to become closer to unit elastic ; this can b explained as follows :

Income elasticity formula = proportionate change in quantity demanded of good / proportionate

Change in income

According to this formula if proportionate change in income of consumers is falling down then demand of good will decrease and when both decreases in same proportion then demand for good will tend to closer to unit elasticity .

If proportionate change in demand for goods is more than proportionate change in income than demand for goods is more than unit elastic .

If proportionate change in demand for goods is less than proportionate change in income than demand for good approaches less than unit elasticity .

Hence in above case the demand for good will approach towards unit elasticity ,then Option 2 is correct...