The Bustraen Company is one of the five firms that manufacture washing machines. The five firms are all about the same size, have approximately equal market shares and produce very similar products. Bustraen sells approximately 200,000 washing machines per annum. The company has engaged a market research consultant to provide estimates of the price elasticity and cross elasticity of demand for its product. These estimates have just been received and are listed as follows:

• The price elasticity of demand for Bustraen's washing machines is -1.85.
• The cross elasticity of demand for Bustraen's washing machines is 0.45 in relation to any one of the firms' machines.
• The price elasticity of demand for all washing machines (if all prices changed together) : -0.55

(a) Explain what Bustraen should expect to happen to its sales if it were to raise prices by 10% and no other firm changed its price.

(b) Explain what Bustraen should expect to happen to its sales if one of its rivals were to raise its price by 10%, ceteris paribus.

(c) Explain what would happen if Bustraen raised its price by 10% and all other firms did the same.

(d) Analyse the limitations of using elasticity of demand concepts in the decision-making process.