Assume That Demand for a Service Depends Upon Price and Income

Multiple Choice

Assume that demand for a service depends upon price and income, where the price elasticity of demand is EP = -0.6 and income elasticity is EY = 1.2. If price falls by 4% and income rises by 2%, the quantity demanded of the service will _____.

A) not be affected as the change in price will cancel the change in income
B) increase by 6%
C) increase by 4.8%
D) decrease by 9.6%
E) decrease by 2.4%