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    Interpreting Elasticity Coefficients of Demand

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    6. You have the following information for your product
    a. The price elasticity of demand is -0.9
    b. the income elasticity of demand is 0.5
    c. the cross-price elasticity of demand between your good and a related good is 2.0

    What can you determine about consumer demand for your product from this information?

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    Solution Preview

    The price elasticity of demand is -0.9. Negative sign indicates that price and quantity demanded have inverse relationship (Keeping the other factors unchanged). If the price of product increases by 1%, quantity demanded will decrease by ...

    Solution Summary

    Solution predicts the behavior of demand with the help of information provided.