In the Face of Gasoline Prices Approaching $4

question 9

Essay

In the face of gasoline prices approaching $4.00 automobile dealerships are heavily marketing their compact cars and hybrid vehicles. However, an interesting development is that many of these dealerships are offering their economy cars at MSRP (manufacturers suggested retail price) without offering discounts. What do you suppose these dealerships believe about the price elasticity of demand for these economy cars?

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Definitions:

Market Wage Rate

The prevailing rate of pay for a specific job in the labor market, influenced by supply and demand for labor in that field.

Units of Labor

The quantity of labor input, measured in hours or number of workers, used in the production of goods and services.

Supply Determined

A scenario where the quantity of goods available in the market is primarily dictated by the supply side, rather than consumer demand.

Spruce Goose

The nickname for the Hughes H-4 Hercules, famously known as the largest wooden airplane ever constructed and flown only once.