Question
Assume SeatComfy Inc. estimates the demand for its table chairs to be Q = 5,000 - 25P + 4I +10PA - 15 PT, where P
Assume SeatComfy Inc. estimates the demand for its table chairs to be Q = 5,000 - 25P + 4I +10PA - 15 PT, where P = the price of SeatComfy's chairs; PA = average price of competitors' chairs; PT = price of tables; and I = average income of SeatComfy's customers. Which of the following is true?
A. SeatComfy's chairs are inferior goods; SeatComfy's chairs and tables are complements, while SeatComfy's and competitors' chairs are substitutes. SeatComfy's sales decrease by 250 units for each $10 increase in their own price.
B. SeatComfy's chairs are normal goods; SeatComfy's and competitors' chairs are substitutes, while SeatComfy's sales are not affected by the pricing decisions of table producers. SeatComfy's sales increase by 50 percent if the price decreases by $2.
C. SeatComfy's chairs are normal goods; SeatComfy's chairs and tables are complements, while SeatComfy's and competitors' chairs are substitutes. SeatComfy's sales decrease by 25 units as price increases by $1.
D. SeatComfy's chairs are normal goods; SeatComfy's chairs and tables are complements, while SeatComfy's and competitors' chairs are substitutes. SeatComfy's sales decrease by 250 units as price increases by $1.
Step by Step Solution
3.49 Rating (156 Votes )
There are 3 Steps involved in it
Step: 1
Answer Q 5000 25P 4I 10PA 15 PT Option C Reason Chairs sre normal goods due t...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started