In a 6-brand simulation model used to evaluate the effects of price increases of one brand...

In a 6-brand simulation model used to evaluate the effects of price increases of one brand on the shares of rival brands of luxury automobiles, how many own-price and cross-price elasticities would be estimated?

a. 5 own-price elasticities, 16 cross-price elasticities
b. 6 own-price elasticities and 30 cross-price elasticities
c. 6 own-price elasticities and 12 cross-price elasticities
d. 6 own-price elasticities and 36 cross-price elasticities

Solutions

Expert Solution

Since there are 6 brands, there is going to be 6 own price elasticity, one for each.

The cross price elasticity is calculated for 2 goods at a time. Hence total number of cross price elasticity=6*5=30.

Hence the correct option is

b. 6 own-price elasticities and 30 cross-price elasticities

Rahul Sunny answered 2 years ago

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