Assume That the Price and Income Elasticities of Demand for Luxury

Multiple Choice

Assume that the price and income elasticities of demand for luxury cars are EP = -0.52 and EY = 3.2 respectively. In the coming year, car prices are expected to rise by 2 percent and income by 8 percent. Based on this information, sales of cars are expected to _____.

A) fall by 0.52%
B) increase by 24.56%
C) increase by 5%
D) fall by 3.04%
E) fall by 32.84%