**Question: **Between 1999 and 2000, the quantity of automobiles produced and sold declined by 20 percent. During this period, the real price of cars increased by 5 percent, real income levels declined by 2 percent, and the cost of gasoline increased by 20 percent. Knowing that the income elasticity of demand is +1.5 and the cross price elasticity of gasoline and cars is -0.3.

**a) **Compute the impact of the decline in real income levels on the demand for cars

**b) **Compute the impact of the gasoline price increase on the demand for cars.

**c) **Compute the price elasticity of the demand for cars during this period.

**Solution:**The solution consists of 250 words (1 page)

**Deliverables:**Word Document