Assignment Task: Kobe Ball Co. economists look at historical data to determine the cross-price elasticity of demand between the price of Wilson football and the quantity demanded for Kobe Ball Co. footballs. Data shows that when Wilson increased the price of their footballs from 18 USD to 21 USD, the quantity demanded of Kobe Ball Co. footballs increased from 600,000 to 700,000. Show all work and calculations.
a. What is the cross-price elasticity using the midpoint formula?
b. What does the sign of the coefficient (positive or negative) for the cross-price elasticity of demand suggest (type of relationship relevant to cross-price elasticity)?
c. If findings remain consistent, if Wilson increases their price another 10%, whiles Kobe Ball Co keeps prices constant, by what percentage should the sales of Kobe Ball Co footballs increase?
d. Give an example of a product that would expect to complement a football.