Answered: 3))Knitex wants to maximize its…

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter7: Consumer Choice And Elasticity

Section: Chapter Questions

Problem 13CQ: Suppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a....

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3))Knitex wants to maximize its profits. It produces a product that has many substitutes and requires a large share of the consumer’s budget. In order to increase revenues, Knitex has decided to increase the price of the product. Which of the following statements is true about Knitex’s decisions ?

a)The elasticity of demand for Knitex’s product is probably inelastic so increasing price will not change revenue

b)The elasticity of demand for Knitex’s product is probably elastic so increasing price will decrease revenue

c)The elasticity of demand for Knitex’s product is probably inelastic so increasing price will increase revenue

d)The elasticity of demand for Knitex’s product is probably elastic so increasing price will not change revenue

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