1. The cross elasticity between Product A and Product B is 10. Do you think that Product A is likely to face an elastic or inelastic demand curve? Explain.
2. Vijay Bhattacharya is interested in estimating the industry demand curve for a particular product. He has gathered data on historical prices and quantities sold in the industry. He knows that the industry supply curve has been stable over the entire period. He is considering estimating a regression between price and quantity and using the result as an estimate of the demand curve. Do you think this technique will result in a good estimate of the demand curve? Explain.