A firm selling a normal good has a price elasticity of demand coefficient of 3.0 and an income elasticity of demand coefficient of 2.2. Assume that economists forecast a recession within the next year with an anticipated decline in income of 12% caused by an increase in unemployment. How would you advise this firm to prepare for this recession? Explain your answer. (5 points) If the firm takes no action, by how much would the demand for its product decline? (5 points)

Answer rating: 100% (QA)

Advising the Firm Given the price elasticity of demand PED coefficient of 30 we can infer that the d... View the full answer