Table 2.2 gives the own and cross-price elasticities for selected automobile models.2 Specifically, each cell corresponds...

   

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Table 2.2 gives the "own" and cross-price elasticities for selected automobile models.2 Specifically, each cell corresponds to the demand elasticity of the car model listed in the row with respect to changes in the price of the car model listed in column. TABLE 2.2 Automobile demand elasticities Model Mazda 323 Cavalier Accord Taurus Century BMW 735i 323 -6.4 0.0 0.0 0.0 0.0 0.0 Cavalier 0.6 -6.4 0.1 0.1 0.1 0.0 Accord 0.2 0.2 -4.8 0.2 0.2 0.0 (a) Why are the "own" elasticities so high? (b) Are the Accord and Taurus complements or substitutes? (c) What are the Taurus's closest competitors? Taurus 0.1 0.1 0.1 -4.2 0.1 0.0 Century 0.0 0.1 0.0 0.0 -6.8 0.0 BMW 0.0 0.0 0.0 0.0 0.0 -3-5 (d) If GM lowers the price of its Chevy Cavalier, does it "cannibalize" its Buick Century sales? (e) Why is the direct elasticity for the Mazda not lower than the elasticity for more expensive models (as the rule of thumb would suggest)? (f) Suppose Honda sold 300k Accords in 2001. In 2002, the price of the Accord decreased by 2%, whereas the price of the Taurus decreased by 3%. What is the likely change in Accord sales? Table 2.2 gives the "own" and cross-price elasticities for selected automobile models.2 Specifically, each cell corresponds to the demand elasticity of the car model listed in the row with respect to changes in the price of the car model listed in column. TABLE 2.2 Automobile demand elasticities Model Mazda 323 Cavalier Accord Taurus Century BMW 735i 323 -6.4 0.0 0.0 0.0 0.0 0.0 Cavalier 0.6 -6.4 0.1 0.1 0.1 0.0 Accord 0.2 0.2 -4.8 0.2 0.2 0.0 (a) Why are the "own" elasticities so high? (b) Are the Accord and Taurus complements or substitutes? (c) What are the Taurus's closest competitors? Taurus 0.1 0.1 0.1 -4.2 0.1 0.0 Century 0.0 0.1 0.0 0.0 -6.8 0.0 BMW 0.0 0.0 0.0 0.0 0.0 -3-5 (d) If GM lowers the price of its Chevy Cavalier, does it "cannibalize" its Buick Century sales? (e) Why is the direct elasticity for the Mazda not lower than the elasticity for more expensive models (as the rule of thumb would suggest)? (f) Suppose Honda sold 300k Accords in 2001. In 2002, the price of the Accord decreased by 2%, whereas the price of the Taurus decreased by 3%. What is the likely change in Accord sales?