The demand for Penn's oil motor oil can be characterized by the following point elasticities: price elasticity=-2.5,cross-price elasticity with Value Lean motor oil = 1.5,and income elasticity=0.75. Indicate whether statement is true or false and explain your answer. A 0.9%price reduction for Penn's Oil would be necessary to overcome the effects of a 3% decline in income.
Price Elasticity = Percentage change in quantity demanded divided by percentage change in Price = -2.5
<br>Cross Price Elasticity with Value Lean motor oil = 1.5
<br>Income Elasticity = Percentage change in quantity ...