Lay down all the theories you know from your Econ 1 course. Here we go: today, w

Question

Lay down all the theories you know from your Econ 1 course. Here we go: today, while I was shopping at Ralph's store for Thanksgiving, I realized that most of shoppers were picking on one item. This item is the Turkey.

The Economic Theory says that when the demand for a given product goes up, the price of the item should go up (other things staying constant). However, many of the Turkey in the store were marked down from the original price. Is the Economic theory wrong? To respond to this question, answer the following . (Hint: elasticity).

1.Why will Ralph's store mark down a hot (highly demanded) item? Please explain.

2.Everything being constant, how should the price of chicken behave? Explain why.

3. Turkey and Chicken are what types of goods? (complementary or substitute)

Explanation / Answer

Lets start with definition of elasticity .

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