1. Refer to the section on \"Calculating the Price Elasticitf.r of Demand". Review the formula for calculating price elasticity of demand and work out the following problem: A number of retail stores in San Diego form a \"District". In that district, a popular brand of lady: s handbag was selling at $4 per bag. In one week: the combined sale in the district was EDD. The District Manager then declared a sale of 25% on the handbags. As a result, sale of the handbags increased to 55C! in the following week. a. Calculate price elasticity of demand. [Use the following formula: Elasticity =(Change in quantity demandedr'At'erage quantity)e"(Change in priceI'Average price) b. 1iWhat does the coefcient of elasticity indicate? Explain your answer. 2. A recent stud}.r determined the following elasticities for Volkswagen Beetles: Price elasticity of demand = 2 Income elasticitj,r of demand = 1.5 Based on this information, answer the following questions: a. \"mat will happen if the price of Volkswagen Beetles is reduced b}r 19%? b. 1ill'llat will happen to the price and quantity of Beetles if consumer income increases