An increase in consumer income will increase the price and


A recent study determined the following elasticities for Volkswagen Beetles: Price elasticity of demand = 2 Income elasticity of demand = 1.5 The supply of Beetles is elastic. Based on this information, are the following statements true or false? Explain your reasoning.

a. A 10% increase in the price of a Beetle will reduce the quantity demanded by 20%.

b. An increase in consumer income will increase the price and quantity of Beetles sold. Since price elasticity of demand is greater than 1, total revenue will go down.

Request for Solution File

Ask an Expert for Answer!!
Econometrics: An increase in consumer income will increase the price and
Reference No:- TGS01494562

Expected delivery within 24 Hours