Question
The demand for tennis rackets can be characterized by the following point elasticities: price elasticity = 1.5, cross-price elasticity with tennis club membership fees= 2.0,
The demand for tennis rackets can be characterized by the following point elasticities: price elasticity = 1.5, cross-price elasticity with tennis club membership fees= 2.0, and income elasticity = 3.0. Indicate whether each of the following statements is true or false, and explain your answer.
A. A price increase for tennis rackets will decrease both the number of units demanded and the total revenue of sellers. B. The cross-price elasticity indicates that a 2% reduction in the price of tennis rackets will cause a 4% increase in tennis club membership demand. C. Tennis rackets are cyclical normal goods. D. Falling tennis club membership fees will definitely increase revenues received by sellers of both tennis rackets and tennis club memberships. E. A 2% price reduction in tennis racket prices would be necessary to overcome the effects of a 1.5% decline in income.
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