In This Problem, Demonstrate Your Knowledge of Percentage Rates of Change

Multiple Choice

In this problem, demonstrate your knowledge of percentage rates of change of an entire demand function (HINT: % $\Delta$ Q = E_P . % $\Delta$ P + E_Y . % $\Delta$ Y) . You have found that the price elasticity of motor control devices at Allen-Bradley Corporation is -2, and that the income elasticity is a +1.5. You have been asked to predict sales of these devices for one year into the future. Economists from the Conference Board predict that income will be rising 3% over the next year, and AB's management is planning to raise prices 2%. You expect that the number of AB motor control devices sold in one year will:

A) fall .5%.
B) not change.
C) rise 1%.
D) rise 2%.
E) rise .5%.