Xanfix sells wrenches and screwdrivers. It sells both products at the same price of $9.66 per unit. The firm calculates that the income elasticity of demand for wrenches is 1.5, while the income elasticity of demand for screwdrivers is 2.5 . If the overall consumer income is expected to increase by 6.8 percent in the year ahead, the company should:
a. increase the production of both products,
but it should increase the production of screwdrivers by a greater amount than the production of wrenches.
b. increase the production of both products, but it should increase the production of wrenches by a greater amount than the production of screwdrivers.
c. increase the production of wrenches and decrease the production of screwdrivers.
d. increase the production of screwdrivers and decrease the production of wrenches.
a
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A market is initially in a long-run equilibrium and there is a permanent increase in demand. After the new long-run equilibrium is reached, there
A) are more firms in the market. B) are fewer firms in the market. C) are the same number of firms in the market. D) probably is a different number of firms in the market, but more information is needed to determine if the number of firms rises, falls, or perhaps does not change. E) is no change in the market.
The "allowable deficit" that causes no change in the debt-GDP ratio is equal to the ________ times ________
A) interest rate, outstanding national debt B) interest rate, nominal GDP C) rate of nominal GDP growth, outstanding national debt D) rate of nominal GDP growth, nominal GDP