Own Elasticity of Demand

Suppose that the current market price of VCR’s is $300, the average consumer has disposable income of $30,000 and the price of laser disk players (a substitute for VCR's) is $500. Under these conditions the annual US demand for VCR's is 5 million per year. Statistical studies have shown that for this product the own price elasticity of demand is , the income elasticity of demand isand the cross price elasticity of demand is, where P' is the price of laser disk players. Use this information to predict the annual number of VCR's demanded (forget about the supply) under the following conditions:

a) Increasing competition from Korea causes VCR prices to fall to $270 with I and P' unchanged.

b) Income and tax reductions raise average disposable income to $31,500 with P and P' unchanged.

c) Technical improvements in laser disk players cause their price to fall to $400 with P and I unchanged.

d) All the events above simultaneously.