A family friend is shopping for an exclusive Vera Wang wedding gown for $8,000 but feels that the price is excessive. She argues that the company should lower prices not only to benefit customers but also to increase the company's revenues and profits. What has she assumed about the price elasticity of demand for these gowns? Is her assumption likely to be correct or incorrect? Why?
In this case the friend has assumed that demand is elastic and that a decrease in price would lead to an increase in total revenues. However, her suggestion is likely incorrect being that the exclusive nature of these gowns would mean that many of the existing customers would be willing to purchase the gowns even if the price rose dramatically. As such, the demand is more likely to be inelastic.
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Which of the following market models results in the highest level of consumer surplus, assuming a fixed number of firms with identical costs and a given demand curve?
A) Cournot B) Stackelberg C) Monopoly D) Cartel
Which of the following statements is true?
A. A model shows the estimated parameters of the explanatory variables. B. A model represents a population relationship. C. In an empirical paper, the estimation methods should be discussed before specifying a model. D. The methods for estimating a model are same as the model itself.