A recent study determined the following elasticities for Volkswagen Beetles: Price elasticity of demand = 2 Income
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A recent study determined the following elasticities for Volkswagen Beetles:
Price elasticity of demand = 2 Income elasticity of demand = 1.5 The supply of Beetles is elastic. Based on this information, are the following statements true or false? Explain your reasoning.
a. A 10% increase in the price of a Beetle will reduce the quantity demanded by 20%.
b. An increase in consumer income will increase the price and quantity of Beetles sold.
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