View the step-by-step solution to:


a. Calculate the cross elasticity of demand between Old Navy's sports shirts and Gap's sports shirts

during February and March. Are the two companies' sports shirts good or poor substitutes? Why? Explain.

b. Suppose that the coefficient of price elasticity of demand for Old Navy's sports shirts is -2.0 Assuming that Gap keeps its price at $24, by how much must Old Navy cut its price to build its sales of shirts back up to 23,000 per month? (Hint: Use the arc formula for price elasticity and substitute the known values into it and solve for the unknown price).

c. Would you recommend that Old Navy cut its price to the value calculated in part (b)? Why or why not?

Top Answer

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.


Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online