Suppose We Estimate That the Demand Elasticity for Fine Leather

question 16

Multiple Choice

Suppose we estimate that the demand elasticity for fine leather jackets is -.7 at their current prices.Then we know that:

• A) a 1% increase in price reduces quantity sold by .7%.
• B) no one wants to buy leather jackets.
• C) demand for leather jackets is elastic.
• D) a cut in the prices will increase total revenue.
• E) leather jackets are luxury items.

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Definitions:

Assets

Resources owned by a business or individual that have economic value and can contribute to future profits.

Excess Capacity

A situation in which a company can produce more goods or services than the market demands, often leading to idle resources or reduced production rates.

Efficient

The quality of achieving maximum productivity with minimum wasted effort or expense.

Cycle Inventory

Inventory that is held to manage the normal fluctuation of production or supply and demand, rotating through cycles of replenishment.