10Income Cross Elasticity DemandHard1 mark
An economy is experiencing a fall in real GDP. Also, deflation has caused the prices of four goods,
A, B, C and D to each fall by 5%.
Which good is likely to enjoy the largest increase in its sales revenue?
| income elasticity of demand | price elasticity of demand | |
|---|---|---|
| A | +0.5 | −1.5 |
| B | +1.5 | −1.0 |
| C | −0.5 | −1.0 |
| D | −1.5 | −1.5 |