There are a number of competing producers of jeans. These firms are now also facing competition from new sportswear designed to also be worn as leisurewear. This increased competition has made demand for jeans more price-elastic. For instance, a government report has estimated that the price elasticity of demand for one of the oldest firm's jeans in Asia is - 2.5.

(a) What is meant by a price elasticity of demand of - 2.5? [2 Marks]

(b) Explain the importance of price elasticity of demand for a firm. Use Arrows for indication / explanation. [4 Marks]

(c) Discuss whether long-established and well-known firms are likely to be more successful than firms that are new to an industry. [4 Marks]