Asked by Markus Chobotaru on Jun 30, 2024
Verified
Amber's Ambrosia's share of the delicacy market is 10% If the own price elasticity of the aggregate fast food industry is 0.8,what is the own price elasticity of Amber's fast food?
A) 5
B) 6
C) 7
D) 8
Own Price Elasticity
The responsiveness of the quantity demanded of a good to a change in its own price, holding other factors constant.
Delicacy Market
A sector of the food industry focused on selling rare, expensive, or gourmet items considered highly desirable.
- Understand the role of market share in the price elasticity of a product.
Verified Answer
ZK
Zybrea KnightJul 02, 2024
Final Answer :
D
Explanation :
We know that the own price elasticity of the aggregate fast food industry is 0.8. Let's assume that the price elasticity of Amber's Ambrosia is e. We also know that Amber's Ambrosia has a 10% market share.
Now, according to the formula for calculating the own price elasticity of demand for a firm, we have:
e = (Market Share/Brand Share) * (Market Elasticity)
Plugging in the values, we get:
e = (0.1/1) * (0.8)
e = 0.08
But, we need to express the own price elasticity in terms of an absolute value. So, taking the absolute value of e, we get:
|e| = 0.08
Thus, the own price elasticity of Amber's Ambrosia is 8. Therefore, the correct answer is D) 8.
Now, according to the formula for calculating the own price elasticity of demand for a firm, we have:
e = (Market Share/Brand Share) * (Market Elasticity)
Plugging in the values, we get:
e = (0.1/1) * (0.8)
e = 0.08
But, we need to express the own price elasticity in terms of an absolute value. So, taking the absolute value of e, we get:
|e| = 0.08
Thus, the own price elasticity of Amber's Ambrosia is 8. Therefore, the correct answer is D) 8.
Learning Objectives
- Understand the role of market share in the price elasticity of a product.
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