The wrist watch industry in a country is not very competitive. There are limited brands available and the existing firms use their market power to keep prices high. Envy, one of the leading brands in the market, is planning to increase the price from $1,000 to $1,100 per watch. The firm is expecting the quantity demanded to fall by only 7 percent. However, after the price is increased to $1,100, quantity demanded actually declined by 12 percent. Sonia, a student of economics, knows that the average income level in this country has increased over the last year. When actual sales of Envy watches turn out to be lower than anticipated, she concludes that the income elasticity of demand for Envy watches is negative. Her conclusion is flawed because

Question

24-03-2020
Business

contestada

The wrist watch industry in a country is not very competitive. There are limited brands available and the existing firms use their market power to keep prices high. Envy, one of the leading brands in the market, is planning to increase the price from $1,000 to $1,100 per watch. The firm is expecting the quantity demanded to fall by only 7 percent. However, after the price is increased to $1,100, quantity demanded actually declined by 12 percent. Sonia, a student of economics, knows that the average income level in this country has increased over the last year. When actual sales of Envy watches turn out to be lower than anticipated, she concludes that the income elasticity of demand for Envy watches is negative. Her conclusion is flawed because

Respuesta :

Otras preguntas

Janet home went to Citizen Bank she borrowed $7,000 at a rate of 8% the date of the loan was September 20th Jeanette hope to repay the loan on January 20th sing

Which of the following was true of the democracy that emerged at the turn of the century? a. It was generally supported by Federalists b. Common men were no lon

1+cos2A/cos2A = tan2A/tanA prove LHS=RHS

A number cube is rolled 360 times and the results are recorded as follows: 47 ones, 55 twos, 67 threes, 67 fours, 35 fives, and 89 sixes. What is the experiment

A. write an expression that represent the amount Jerri spent on produce in simplest terms. (please explain)

What is it called when a writer does not state his or her main idea directly? a. text structure b. inference c. counterargument d. implied claim

I need help for this question

10.2cm is rounded to one decimal place. Write down the minimum possible length it could of been

The golf shop is having a 20% discount sale the regular price of golf balls is five dollars each how many golf balls can you buy the discount was $40

List two types of positive peer pressure and give examples of each. (Site 1)

nwandukelechi nwandukelechi · Answer 1 · 2020-03-26T21:40:08+01:00

Answer:

B. she is confusing between price elasticity of demand and income elasticity of demand.

Explanation:

Income elasticity of demand measures the change of quantities demanded for a particular good to a change in its income.

It is therefore calculated as the ratio of the percentage change in quantity demanded to the percentage change in income.

Price elasticity of demand is a measure of the change in the quantity demanded or purchased of a product in relation to its price change.

Mathematically:

Price Elasticity of Demand = % Change in Quantity Demand / % Change in Price.

From the above definitions stated about income and price elasticity of demand, the income in that year increased but the quantity of goods demanded decreased further by 5% from the predicted 7% (12 %)