You are told that:

a. the price elasticity of demand for widgets is -0.75 (its absolute value is, therefore,

0.75),

b. the income elasticity of widgets is 2, and

c. the cross-price elasticity of widgets and gadgets is 4.

Part 1:

Keeping in mind that raising prices results in decreasing sales:

a. what will be the percentage change in quantity demanded if prices are increased

by 50%?

b. Will the total revenue of the firm increase, decrease, or remain the same when

prices are increased by 50%?

Part 2:

If there is a 20% across the board increase in income taxes, lowering the income of all

consumers:

a. Will the sales of widgets increase, decrease, or remain the same?

b. By what percentage amount will the quantity sold change, if at all?

Part 3:

If gadget prices rise by 15%:

a. In what direction (increase, decrease, or no change) will widget sales change

b. By what percentage amount will widget sales change, if at all?