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    Elasticity

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    Demand for cassettes can be characterized by the following point elasticities:price elasticity =-2,cross price elasticity with aaa batteries is -1.5, and income elasticity =3. please explain the following statement.

    a. A 3% price reduction in cassette players would be necessary to overcome the effects of a 2% decline in income. (Please show calculations)

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    From the income elasticity =3, we know a 2% decline in income will result in a 3*2%=6% decrease in demand for ...

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    $2.19

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