BMW luxury and Lamborghini luxury are two good brands of luxury cars. The cross price elasticity between them is +2.8 in the USA market.
(i) How an increase in the price of BMW luxury will affect the demand for Lamborghini luxury in the market?
(ii) Suppose the current sales of Lamborghini in the market is 100000 nos. If the price of BMW luxury increases by 20 percent what will be the sales of Lamborghini luxury now?
(iii) Income elasticity for car is +1.8. If income drops by 20% how the car companies will be influenced in terms of the demand for cars?