Words O Path: p QUESTION 4 Between 2007 and 2008, the quantity of automobiles pr

Question

Words O Path: p QUESTION 4 Between 2007 and 2008, the quantity of automobiles produced and sold declined by 20 percent During this period the real price of cars increased by 5 percent, real income levels declined by 2 percent, and the real cost of gasoline increased by 20 percent Knowing that the income elasticity of demand is +1.5 and the cross price elasticity of gasoline and cars is -0.3, compute the price elasticity of demand for automobiles during this period TTTT Paragraph Arial 3 (12pt) ? :-·-·T·?·? ? HTHL CS

Explanation / Answer

Price elasticity of demand=%change in quantity/%change in price

%change in quantity=-20%

%change in price=5%

Ed=-20%/5%=-4%

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