You raise your product price by $10 in market A but leave it unchanged in market B.Sales in A fall from 840 units per week to 740 while sales in B rise from 770 to 790.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

Quizplus · Accepted Answer

To calculate the difference-in-difference estimate, we need to find the difference in sales before and after the price change in both markets, and then calculate the difference between the changes.

In market A, sales decreased by 100 units after the price change ($840 - $740 = -$100). In market B, sales increased by 20 units after the price remained unchanged ($790 - $770 = $20).

Therefore, the difference in the changes is -100 - 20 = -120 units. This means that the price change led to a decrease in sales of 120 units. Since the question asks for the absolute value, the answer is 120 units.

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