Problem:
Sony cut the price of its 42 HDTV LED TV from $3000 in the first quarter of 2013 to $2500 in the second quarter. Sales rose from 25,000 to 30,000.
a) Based upon this information, what is your best estimate of price elasticity of demand?
b) How valid is this process for estimating price elasticity of demand? When will it give reasonable approximates and when will it give misleading ones?
c) Panasonic decided to hold the price of its 42” LED TV at $3000. Their sales fell from 15,000 to 12,500. What is your best estimate of cross-price elasticity of the demand for Panasonic plasma sets?