Puma's share of the athletic shoe market is 30% The own price elasticity of demand for Puma athletic shoes is 2.5.What would be the own price elasticity of athletic shoes as a whole?
A)8.3
B)0.75
C)0.54
D)1.5

Question

​Puma's share of the athletic shoe market is 30% The own price elasticity of demand for Puma athletic shoes is 2.5.What would be the own price elasticity of athletic shoes as a whole?
A)​8.3
B)0.75
C)0.54
D)​1.5

Quizplus · Accepted Answer

The own price elasticity of demand for the entire athletic shoe market is lower than for a single brand like Puma because consumers have more alternatives within the market. If Puma raises its prices, consumers can switch to other brands, but if all athletic shoes increase in price, the options for substitution are less. The formula for calculating the market elasticity given a firm's elasticity and market share is: Market Elasticity = Firm Elasticity * Firm's Market Share. Therefore, 2.5 * 0.30 = 0.75.

​Puma's Share of the Athletic Shoe Market Is 30% the Own

Puma's Share of the Athletic Shoe Market Is 30% the Own