Reference no: EM13831124
An economist has estimated the demand for cable television services in Eastern Pennsylvania, and has found the following elasticities:
Price elasticity of demand for cable TV: EP = -1.25
Income elasticity of demand for cable TV: EM = 0.85
Cross-price elasticity between cable TV and Netflix: E Cable, P Netflix= 1.30
Indicate whether each of the following statements is true or false, and explain why.
If the cable television company wants to increase revenues, it should increase price.
Reducing price will increase the number of customers for cable television and the revenues generated.
Reducing the price of Netflix would increase the number of customers acquiring cable television services.
A 10 percent increase household income will result in an 85 percent increase in demand for cable television service.
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