Question: 4 a a product has a price elasticity of demand...
(a) A product has a price elasticity of demand equal to -2. If price increases by 6 percent, what will be the decrease in quantity demanded?
(b) Is this product most likely a luxury or necessity, and why?
(c) Another product has an income elasticity of 0.8. If income rises by 8 percent, what will be the increase in demand?
(d) Two products have a cross price elasticity of -0.4. Are these product substitutes or complements.
(e) Yet another product has a price elasticity of demand equal to -1.50. If taxes are increased on producers of this product, will most of the tax be paid by consumers or producers?