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Question: 4 a a product has a price elasticity of demand...

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4.

(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?

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