Ingrid's Ice cream Parlor has an own price elasticity of 5.It has an approximate share of 10% in the market for ice cream.What is the aggregate own price elasticity of the market?
A)0.1%
B)0.5%
C)0.7%
D)1%

Question

​Ingrid's Ice cream Parlor has an own price elasticity of 5.It has an approximate share of 10% in the market for ice cream.What is the aggregate own price elasticity of the market?
A)​0.1%
B)0.5%
C)0.7%
D)​1%

Quizplus · Accepted Answer

The aggregate own price elasticity of the market can be estimated using the formula for the elasticity of a firm with respect to the market elasticity, which is: E_market = E_firm * S, where E_firm is the firm's own price elasticity and S is the firm's market share. Here, E_firm = 5 and S = 10% or 0.1. Therefore, E_market = 5 * 0.1 = 0.5.

​Ingrid's Ice Cream Parlor Has an Own Price Elasticity of 5.It

Ingrid's Ice Cream Parlor Has an Own Price Elasticity of 5.It