Suppose we believe the income response for hamburger consumption is positive (normal) at low income levels but becomes negative (inferior) at high income levels. Is the log-linear demand function a good choice for this particular product?
A) Yes, the log-linear model has an income elasticity that can be positive or negative.
B) No, the log-linear model has a constant income elasticity that cannot change with the income level.
C) No, the Engel curves for this case are vertical lines, and this behavior cannot be represented with the log-linear demand function.
D) none of the above
ANSWER
B
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