If the Price of Shoes Falls from $10 to $8

question 71

Multiple Choice

If the price of shoes falls from $10 to $8 and the amount sold increases by 12 percent,it can be concluded that:

• A) the demand for shoes is perfectly inelastic.
• B) the demand for shoes is inelastic.
• C) the demand for shoes is elastic.
• D) shoes are complementary goods.

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Definitions:

Kinked-Demand Curve Model

An economic theory suggesting that in oligopolistic markets, companies may not change their prices because the demand curve is more elastic for price increases and less elastic for price decreases.

Unit Costs

The amount of money a company spends on producing, holding, and marketing one unit of a certain product or service.

Equilibrium Price

The market price at which the quantity of a good supplied equals the quantity demanded, leading to a stable market condition where there is no tendency for the price to change.

Game Theory

A branch of economics and mathematics that studies strategic interactions among rational decision-makers.