Solved: Distinctive Designs Inc imports and distributes

dress and sports watches

Distinctive Designs Inc imports and distributes dress and sports watches

Distinctive Designs, Inc., imports and distributes dress and sports watches. At the end of the
company's fiscal year, brand manager Charlie Pace has asked you to evaluate sales of the
sports watch line using the following data:

In particular, Pace has asked you to estimate relevant demand elasticity’s. Remember that to
estimate the required elasticity’s, you should consider months only when the other important
factors considered in the preceding table have not changed. Also note that by restricting your
analysis to consecutive months, changes in any additional factors not explicitly included in the
analysis are less likely to affect estimated elasticity’s. Finally, the average arc elasticity of
demand for each factor is simply the average of monthly elasticity’s calculated during the past
year.

A. Indicate whether there was or was not a change in each respective independent variable for
each month pair during the past year.

B. Calculate and interpret the average advertising arc elasticity of demand for sports watches.
C. Calculate and interpret the average arc price elasticity of demand for sports watches.
D. Calculate and interpret the average arc cross-price elasticity of demand between sports and
dresswatches.

Distinctive Designs Inc imports and distributes dress and sports watches

ANSWER
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