posted by sherry on .
Suppose that your firm was accused of illegally conspiring with other sellers to act as a monopolist. In searching for an expert witness, you discover one economist who has calculate the cross elasticity of demand for your industry's product to be+2.05, while another economist has calculated the cross elasticity of demand to be +0.43. Which econimist whould your hire testify on behalf of your firm? Explain your answer
Take a shot.
Note that a +2.05 cross price elasticity means that if the price of some particular other product goes up by 1%, the demand for the firm's product (at the prevailing price) will go up by 2.05%. Compare this to an alternative measure of +0.43 Which econmist thinks the firm makes a product that has "good" substitutes?