Price elasticity of demand for automobiles

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A Researcher estimated that the price elasticity of demand for automobiles in the US is -1.2, while the income elasticity of demand is 3.0. Next year, US automakers intend to increase the average price of automobiles by 5%, and they expect consumers’ disposable income to rise by 3%

(a) If sales of domestically produced automobiles are 8 million this year,how many automobiles do you expect US automakers to sell next year?

(b) By how much should domestic automakers increase the price of automobiles if they wish to increase sales by 5% next year?

Reference no: EM131172371

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