Purchase Solution

# Calculating annual number of VCRs sold

Not what you're looking for?

Suppose that the current market price of VCRs is \$300, that average consumer disposable income is \$30,000, and that the price of DVD players (a substitute for VCRs) is \$500. Under these conditions annual U.S. demand for VCRs is 5 million per year. Statistical studies have shown that for VCRs the own-price elasticity of demand is -1.3. The income elasticity of demand for VCRs is 1.7. The cross-price elasticity of demand for VCRs with respect to DVDs is 0.8. Use this information to predict the annual number of VCRs sold if Income tax reductions raise average disposable personal income by 5%, with prices for DVDs and VCRs unchanged.

4.8 million

6.17 million

5.425 million

5.2 million

4.61 million

##### Solution Summary

Solution calculates annual number of VCRs sold following a tax reduction.

##### Solution Preview

Change in disposable personal income=+5%

Change in demand=Income elasticity of ...

Solution provided by:
###### Education
• BEng (Hons) , Birla Institute of Technology and Science, India
• MSc (Hons) , Birla Institute of Technology and Science, India
###### Recent Feedback
• "Thank you"
• "Really great step by step solution"
• "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
• "Thanks Again! This is totally a great service!"
• "Thank you so much for your help!"

##### Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

##### Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

##### Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

##### Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

##### Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.