What is the sign of the cross price elasticity, Microeconomics

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Australians are turning to scooters to combat escalating petrol prices. After a slump in the March quarter this year, demand for scooters was up by more than 7 per cent in the first half of 2008, according to figures released today by the Federal Chamber of Automotive Industries (FCAI).

a. Do you agree that rising petrol prices are associated with the change in sales of scooters? What is the sign of the cross price elasticity of demand for new scooters with respect to petrol prices?

b. The report also found that '(i)n scooters, SYM led the way with 14.6 per cent of the market ahead of Piaggio on 13.2 per cent, Yamaha 11.9 per cent, Vespa 10.2 per cent and Honda 7.5 per cent'. Comment on the difference between the price elasticity of demand for each brand of scooter compared with the price elasticity of demand for all scooters.

 

 


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