BMW luxury and Lamborgini luxury are two good brands of luxury cars. The cross price elasticity...

 

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BMW luxury and Lamborgini luxury are two good brands of luxury cars. The cross price elasticity between them is +2.8 in the USA market. (i) How an increase in the price of BMW luxury will affect the demand for Lamborgini luxury in the market? (ii) Suppose the current sales of Lamborgini in the market is 100000 nos. If the price of BMW luxury increases by 20 percent what will be the sales of Lamborgini luxury now? (iii) Income elasticity for car is +1.8. If income drops by 20% how the car companies will be influenced in terms of the demand for cars? (b) Given the demand and supply function for a product as Q 1500 - 3P (Demand) = Q1100 +2P (Supply) (i) Find the equilibrium Price and Quantity of the product. (ii) If a GST of $50 is imposed on the product, find its effect on the equilibrium Price and Quantity. (iii) Who is more elastic, the consumer or the seller? With the help of demand and supply curve draw a suitable diagram to show the effect of GST on the equilibrium Price and Quantity. BMW luxury and Lamborgini luxury are two good brands of luxury cars. The cross price elasticity between them is +2.8 in the USA market. (i) How an increase in the price of BMW luxury will affect the demand for Lamborgini luxury in the market? (ii) Suppose the current sales of Lamborgini in the market is 100000 nos. If the price of BMW luxury increases by 20 percent what will be the sales of Lamborgini luxury now? (iii) Income elasticity for car is +1.8. If income drops by 20% how the car companies will be influenced in terms of the demand for cars? (b) Given the demand and supply function for a product as Q 1500 - 3P (Demand) = Q1100 +2P (Supply) (i) Find the equilibrium Price and Quantity of the product. (ii) If a GST of $50 is imposed on the product, find its effect on the equilibrium Price and Quantity. (iii) Who is more elastic, the consumer or the seller? With the help of demand and supply curve draw a suitable diagram to show the effect of GST on the equilibrium Price and Quantity.

Answer rating: 100% (QA)

i A positive cross price elasticity of 28 means that the two goods are substitutes This means that if the price of BMW luxury increases consumers will ... View the full answer