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In a recent study it has been estimated that the own price elasticity of demand for...

In a recent study it has been estimated that the own price elasticity of demand for a special type of U.S. manufactured automobile tires is - .75, while the income elasticity of demand is 1.1 and the cross price elasticity of demand with respect to foreign imports is 1.4. The current sales volume for the U.S. manufactured tires is 5 million unites per year. It is anticipated that the price of the foreign imports will rise by 5%.

(a) Assuming that average income of the target group of customers will not change, calculate the number of tires that the tire manufacturers will be able to sell if they plan to increase their own price by 3%.

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Answer #1

MS:- i that, Cuvrent Sales volume milon Perr yem Pice etac of demand S Intome e lacticyap Co price etastici demand -.) demand . Padce 5 O Po tires vwould The小change in quantity demand quanbity demanded P tie cha naein pg11@ 딕 Poveign impo ts 小change ir) quanhhl demanded hntir el- ldeỉan impont(t.IH uantity demanded fo ttres-6小米 hes oould -the .1. reduce b Po quantoly demanded or tived.- Charap n quantity demanded ortesーふchang in guantih demanded花 times or To ta chan quantity demanded-小-ads), -허셔 5,1 loo 2- 9a+10 I OO 1、才62 → 5.80million

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