The demand for Greta’s Grinders can becharacterized by the following point elasticities: price elasticity= -0.8, cross-price elasticity with Melvin’s Mashers = -2, andincome elasticity = 1.2. Which of the following statements isfalse?
- A price increase for Greta Grinders will decrease both thenumber of units demanded and the total revenue Gail gets.
- The cross-price elasticity indicates that a 4% increase in theprice of Melvin’s Mashers will cause an 8% increase in quantitydemanded of Greta Grinders.
- An 8% price reduction for Greta Grinders would be necessary toovercome the effects of a 4% decline in income.
- All the above statements are false. Â
