February 19, 2017

Homework Help: Managerial Economics

Posted by Econo-missed on Saturday, November 1, 2008 at 3:12pm.

Please help with this question:

A researched estimated that the price elasticity of demand for automobiles in the U.S. is -1.2, while the income elasticity if demand is 3.0. Next year, U.S. auto makes intend to increase the avg price of autos by 5%, and they expect consumers' disposable income will increase by 3%.

(a)If sales of domestically produced automobiles are 8 million this year, how many automobiles do you expect U.S. auto makers to sell next year?
(b)By how much should domestic auto makers increase the price of automobiles if they wish to increase sales by 5 percent next year?

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