In 2006, the five leading suppliers of digital cameras in the United States were: Canon, Sony, Kodak, Olympus, and Samsung. The combined market share of these five firms was 60.9 percent. The leading firm was Canon, with a market share of 18.7 percent. The own price elasticity for Canon’s cameras was -4.0 and the market elasticity of demand was -1.6. Suppose that in 2006, the average retail price of a Canon digital camera was $240, and that Canon’s marginal cost was $180 per camera.
Based on this information:
a) Calculate the five-firm concentration ratio and discuss industry concentration.
b) Classify (elastic, inelastic, unitary elastic) and interpret the market elasticity of demand for cameras.
c) Calculate the Rothschild index and interpret it.
d) What is Canon’s Markup factor? What does it mean?