Asked by
Trisha Marie
on Oct 14, 2024
Verified
During the height of the pet rock craze in the 1970s, the price elasticity of demand was estimated to be 1.20.Since pet rocks have a marginal cost of zero, a profit-maximizing seller of pet rocks would
A) leave prices unchanged.
B) need more-detailed market information before making any pricing changes.
C) decrease prices.
D) increase prices.
E) diversify into selling Karen Carpenter LPs.
Price Elasticity Of Demand
A measure of how sensitive the quantity demanded of a good is to a change in its price.
Marginal Cost
The increase in total production cost that comes from making or producing one extra item.
- Become familiar with the approach to profit maximization in differing business environments.
- Understand the importance of the elasticity of demand with respect to price in developing pricing policies.
Verified Answer
LD
Learning Objectives
- Become familiar with the approach to profit maximization in differing business environments.
- Understand the importance of the elasticity of demand with respect to price in developing pricing policies.