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If a 10% increase in the price of gas causes a 40% decrease in the demand for standard sized autos, then the cross-price elasticity of demand is:
a. 25% decrease in quantity demanded
b. 13% decrease in quantity demanded
c. 9% decrease in quantity demanded
d. 7% decrease in quantity demanded
e. 6% decrease in quantity demanded
f. 17% increase in quantity demanded
17. The demand for a product in income inelastic with an elasticity coefficient of 0.85. If there is a 25% increase in demand due to increased income, then the increase in income must be:
a. 29.4% b. 70.0 c. 48 d. 30.7% e. 120% f. 52.5%
18. The cross price elasticity of biscotti demand with respect to the price of Lattes is -0.70 (Lattes and biscotti are complementary goods). If the price of Lattes decreases 20%, what would you expect to happen to biscotti demand?
