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In 1947, the U.S. Department of Justice brought a suit against the DuPont Company (which, at the time, sold75 percent of all the cellophane in the United States) for monopolizing the production and sale of cellophane. In court, DuPont tried to show that cellophane was only one of several goods in the market in which it was sold. The company argued that its market was not the cellophane market but the flexible-packaging materials market, which included (besides cellophane) waxed paper, aluminum foil, and other such products. DuPont pointed out that it had only 20 percent of all sales in this more broadly defined market. Using this information, discuss how the concept of cross elasticity of demand would help establish whether DuPont should have been viewed as a firm in the cellophane market or as a firm in the flexible-packaging materials market.

BuyFind

Microeconomics

13th Edition
Roger A. Arnold
Publisher: Cengage Learning
ISBN: 9781337617406
BuyFind

Microeconomics

13th Edition
Roger A. Arnold
Publisher: Cengage Learning
ISBN: 9781337617406

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Chapter
Section
Chapter 6, Problem 12QP
Textbook Problem

In 1947, the U.S. Department of Justice brought a suit against the DuPont Company (which, at the time, sold75 percent of all the cellophane in the United States) for monopolizing the production and sale of cellophane. In court, DuPont tried to show that cellophane was only one of several goods in the market in which it was sold. The company argued that its market was not the cellophane market but the flexible-packaging materials market, which included (besides cellophane) waxed paper, aluminum foil, and other such products. DuPont pointed out that it had only 20 percent of all sales in this more broadly defined market. Using this information, discuss how the concept of cross elasticity of demand would help establish whether DuPont should have been viewed as a firm in the cellophane market or as a firm in the flexible-packaging materials market.

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