The income elasticity is +2 and income increases by 20% sales were 5000 units, what will they be now ?
Correct answer: B. 7000
- A. 3000
- B. 7000
- C. 5500
- D. 4500
Explanation
A 20% income rise with income elasticity of +2 produces a 40% rise in sales. Forty percent of 5,000 is 2,000, so sales become 7,000 units.
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