After graduating from college, you are hired by the Ford automobile company as an economic analyst. For your first project, you are asked to estimate what would happen to the sales of Ford Mustangs as a result of a change in (i) the price of a Chevrolet Camaro, (ii) the price of gasoline, and (iii) consumer incomes. You are given the following elasticities: Price elasticity of demand for Ford Mustangs = -2.5 Cross-price elasticity between Ford Mustangs and Camaros = 1.5 Cross-price elasticity between Ford Mustangs and gasoline = -0.80 Income elasticity of demand for Ford Mustangs = 3.00

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter3: Demand Analysis
Section: Chapter Questions
Problem 6E
Question
100%
After graduating from college, you are hired by the Ford automobile company as an economic analyst. For your first project, you
are asked to estimate what would happen to the sales of Ford Mustangs as a result of a change in (i) the price of a Chevrolet
Camaro, (ii) the price of gasoline, and (iii) consumer incomes. You are given the following elasticities:
Price elasticity of demand for Ford Mustangs = -2.5
Cross-price elasticity between Ford Mustangs and Camaros = 1.5
%3D
Cross-price elasticity between Ford Mustangs and gasoline = -0.80
Income elasticity of demand for Ford Mustangs = 3.00
%3D
Transcribed Image Text:After graduating from college, you are hired by the Ford automobile company as an economic analyst. For your first project, you are asked to estimate what would happen to the sales of Ford Mustangs as a result of a change in (i) the price of a Chevrolet Camaro, (ii) the price of gasoline, and (iii) consumer incomes. You are given the following elasticities: Price elasticity of demand for Ford Mustangs = -2.5 Cross-price elasticity between Ford Mustangs and Camaros = 1.5 %3D Cross-price elasticity between Ford Mustangs and gasoline = -0.80 Income elasticity of demand for Ford Mustangs = 3.00 %3D
Suppose the price of a Camaro falls by 10%. With all else being equal, sales of Ford Mustangs would
fall
%.
rise
If the price of gasoline increases by 20%, the quantity of Ford Mustangs would
by
%.
rise
fall
If consumer incomes increase by 5%, the quantity of Ford Mustangs would
by
%.
fall
rise
by
Transcribed Image Text:Suppose the price of a Camaro falls by 10%. With all else being equal, sales of Ford Mustangs would fall %. rise If the price of gasoline increases by 20%, the quantity of Ford Mustangs would by %. rise fall If consumer incomes increase by 5%, the quantity of Ford Mustangs would by %. fall rise by
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