You raise your product price by $10 in market A but leave it unchanged in market B.Sales in A fall from 840 to 740 units per week while sales in B rise from 770 to 790 units.The Difference-in-difference estimate of the effect of the price change is:
A)80 units
B)100 units
C)120 units
D)140 units

Question

You raise your product price by $10 in market A but leave it unchanged in market B.Sales in A fall from 840 to 740 units per week while sales in B rise from 770 to 790 units.The Difference-in-difference estimate of the effect of the price change is:
A)​80 units
B)100 units
C)120 units
D)​140 units

Quizplus · Accepted Answer

The difference-in-difference estimate is calculated as the difference in the change in sales between the treatment group (Market A) and the control group (Market B).

For Market A: 
- The change in sales is 840 - 740 = -100 units. 
- This is a result of the price increase, so the treatment effect is -$10.

For Market B: 
- The change in sales is 790 - 770 = 20 units. 
- Sales increased, but the price was not changed, so this is the control group.

The difference-in-difference estimate is therefore: 
- (-100) - 20 = -120 units. 
This means that the price increase in Market A led to a 120-unit decrease in sales compared to what would have been expected if prices had remained the same.

You Raise Your Product Price by $10 in Market a but Leave