Nickey and Aididas produce trainers in the sports-shoe market. For one of their main products they have the following demand curves: Nickey : Pn = 175 – 1.2Qn Aididas = Pa = 125 – 0.8Qa where P is in Pesos and Q is in pairs per week. Questions: The firms are currently selling 80 and 75 pairs of their products per week respectively. 1. What are the current price elasticities for the products? 2. Assume that Nickey reduces its price and increases its sales to 90 pairs and that this also causes a fall in Aididas’s sales to 70 pairs per week. What is the cross-elasticity between the two products? 3. Is the above price reduction by Nickey to be recommended? Explain your answer.
Nickey and Aididas produce trainers in the sports-shoe market. For one of their main products they have the following demand curves: Nickey : Pn = 175 – 1.2Qn Aididas = Pa = 125 – 0.8Qa where P is in Pesos and Q is in pairs per week. Questions: The firms are currently selling 80 and 75 pairs of their products per week respectively. 1. What are the current price elasticities for the products? 2. Assume that Nickey reduces its price and increases its sales to 90 pairs and that this also causes a fall in Aididas’s sales to 70 pairs per week. What is the cross-elasticity between the two products? 3. Is the above price reduction by Nickey to be recommended? Explain your answer.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Nickey and Aididas produce trainers in the sports-shoe market. For one of their main products
they have the following demand
Nickey : Pn = 175 – 1.2Qn
Aididas = Pa = 125 – 0.8Qa
where P is in Pesos and Q is in pairs per week.
Questions:
The firms are currently selling 80 and 75 pairs of their products per week respectively.
1. What are the current price elasticities for the products?
2. Assume that Nickey reduces its price and increases its sales to 90 pairs and that this
also causes a fall in Aididas’s sales to 70 pairs per week. What is the cross-elasticity
between the two products?
3. Is the above price reduction by Nickey to be recommended? Explain your answer.
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