Jenna runs a small boutique in Capitola. She tells one of her suppliers that she is...

Jenna runs a small boutique in Capitola. She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more. On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers?

Group of answer choices

It is somewhat elastic.

It is perfectly elastic.

It is perfectly inelastic.

The price elasticity coefficient is 0.

Solutions

Expert Solution

Correct answer is price elasticity for demand is perfectly elastic because Capitola is only willing to pay $6 for a pair of wool hand warmers which imply any small increase in the price for a pair of wool hand warmers will reduce demand for the same to 0. Demand curve for Capitola horizontal at price $6 and infinite quantity can be demanded at this price but a small increase in the price will reduce demand for wool hand warmers to 0.

First option i.e. price elasticity for demand is somewhat elastic is incorrect because Capitola willingness to pay is $6 and any small increase in price will directly reduce demand to 0.

Third option i.e. price elasticity for demand is perfectly inelastic is incorrect. A perfectly inelastic demand occurs when quantity demanded is not changing with change in price. But in this case price doesnot change for Capitola and quantity demanded for wool hand warmers is not fixed so this option is incorrect.

Last option i.e. the price elasticity coefficient is 0 is wrong because the price elasticity coefficient is 0 when price elasticity for demand is perfectly inelastic.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Andy runs a small pottery firm. in her first year she hired one helper at 12,000...

Andy runs a small pottery firm. in her first year she hired one helper at 12,000 per year, paid annual rent of $5,000 for her shop, and spent $20,000 on material. she has 40,000 of her own funds invested in equipment that could earn her $4,000 per year if alternatively invested. she had been offered $15,000 per year to work as a Potter for a competitor she estimates her entrepreneurial talents are worth $3,000 per year. total annual revenue from...

You are assisting Sarah with her breastfeeding, when she tells you she is not sure how...

You are assisting Sarah with her breastfeeding, when she tells you she is not sure how she should hold the baby when she is breastfeeding. She also asks how long to feed the baby on one breast before she changes breast. She wants to know how she will know if the baby is getting enough to eat since she can’t measure the amount of milk the baby is getting. What will you teach Sarah to assist her?

Mary has her own business, a nail salon that she runs out of her home.She is...

Mary has her own business, a nail salon that she runs out of her home.She is the only nail technician but serves many clients in one day. The following tables provide information about time between arrivals and service time required for a manicure. Assume the only service offered is a manicure. Time Between Arrivals Probability Random Numbers 10 min .2 00-19 20 min .3 20-69 30 min .2 70-89 40 min .3 90-99 Service Time Probability Random Numbers 10 min...

Shondra tells her doctor that she has been feeling jittery and has had trouble sleeping. She...

Shondra tells her doctor that she has been feeling jittery and has had trouble sleeping. She also complains about her roommates changing the thermostat and making it too high. A blood test shows antibodies and suggests she might have an autoimmune disease. What organ do you think the antibodies are binding to and how might this cause her symptoms?

XVIII. Mandi tells the nurse that her boyfriend is a 21-year-old that she met in an...

XVIII. Mandi tells the nurse that her boyfriend is a 21-year-old that she met in an online chat room. After they go out to eat, he complains that she is fat and sometimes punches her in the stomach so that she will throw up her dinner and remember to eat less the next time. To gather data related to the frequency of abuse by Mandi's boyfriend what action should the nurse take first? 1. Instruct the client that there is...

Geraldine is a kindergarten teacher with 20 stu- dents in her classroom. She runs a number...

Geraldine is a kindergarten teacher with 20 stu- dents in her classroom. She runs a number of structured and unstructured activities in the classroom in which the children work individu- ally and in groups. She has found that when the students are in group activities that are less structured (e.g., when engaged in arts and crafts activities around a large table), some students act out. They engage in minor disruptive beha- viors that are reinforced by attention from the other...

A woman in the second trimester of pregnacy tells her physcian thay she has been urinating...

A woman in the second trimester of pregnacy tells her physcian thay she has been urinating excessively for the past week. In addition, she has been extremely thirsty. The next day the physcian does a fasting blood glucose test and finds her glucose level to be 150 mg/dl (normal should be below 100 mg/dl). The physcian makes a diagnosis of gestational diabetes and begins treatments. What is the link between the diagnosis of gestational diabetes and the patient's signs of...

Jenna began the year with a tax basis of $41,000 in her partnership interest. Her share...

Jenna began the year with a tax basis of $41,000 in her partnership interest. Her share of partnership debt consists of $11,000 of recourse debt and $9,000 of nonrecourse debt at the beginning of the year and $11,000 of recourse debt and $11,000 of nonrecourse debt at the end of the year. During the year, she was allocated $52,000 of partnership ordinary business loss. Jenna does not materially participate in this partnership and she has $3,000 of passive income from...

Merry is a chef. She runs her own restaurant business. During the year, Merry incurred the...

Merry is a chef. She runs her own restaurant business. During the year, Merry incurred the following expenses. Advise Merry as to whether the expenses below would be deductible for income tax purposes. - A. B. C. salary costs to casual employees of $50,000 - A. B. C. salary costs of $2,000 to her sister (the amount is excessive, compared to the...

Marisa Williams runs a retail grocery store and purchases items for resale to her customers. She...

Marisa Williams runs a retail grocery store and purchases items for resale to her customers. She is facing an ordering decision about how much of a particular item to purchase at one time.. in order t take advantage of supplier discounts (if it makes sense to do so). Demand = 36,000 units per year order cost = $25 per order Carrying cost = $0.45 per unit purchasing price = $0.85 Discount price= $0.82 (if buy a minimun of 6,000 units...

Subjects