Question

In the computer market Lenovo estimate that price elasticity of it's super lite computer -12.64 and the cross price elasticity of demand is 7.35 .The company now reduce price of this model by 9% of its present price level , explain with example what would happen to A. The sale of Lenovo super lite computer if it's close competitor Samsung also reduce it's price by 11%

Answer 1

What happens in this scenario is that the cross price elasticity of demand of the Levono computer is -10.36

Step-by-step explanation:

To find the answer, we need to use the cross price elasticity of demand (CPED) formula:

CPED = % Δ in quantity demanded of Levono / % Δ in price of Samsung

Here, "Δ" is the the Greek letter "Delta", which is used in math to denote change.

However, we first need to find the change in quantity demanded for the Levono. To find it, we use the price elasticity of demand (PED) formula:

PED = % Δ in quantity demanded / % Δ in price

-12.64 = % Δ in quantity demanded / 0.09

% Δ in quantity demanded = -1.14

Now, we go back to the CPED formula, plug the correct amounts, and solve:

CPED = % Δ in quantity demanded of Levono / % Δ in price of Samsung

CPED = -1.14 / 0.11

CPED = -10.36