An economic consultant recently reported to Sam Snerd that the cross-price elasticitybetween his product and another firm's scooters is 4.5. From this information Sam canconclude that
A) his firm's market is smaller
B) his firm is a monopolist
C) his firm's product has few substitutes
D) there is at least one other firm in his relevant market
E) scooters are complimentary to his firm's product

Question

Quizplus · Accepted Answer

The positive cross-price elasticity of 4.5 indicates that the demand for Sam's product and the other firm's scooters move in the same direction; as the price of scooters increases, the demand for Sam's product also increases, suggesting they are substitutes, not complements. This implies the presence of at least one other firm in his market.

An Economic Consultant Recently Reported to Sam Snerd That the Cross-Price