True, False, or Uncertain...please briefly explain your reasoning. Computers are

Question

True, False, or Uncertain...please briefly explain your reasoning.

Computers are sold competitively. Each computer, such as a Dell or Compaq, contains an operating system, such as Windows, that is pre-loaded on the computer. Suppose that the price of computers is $2000, and the price of an operating system is $100. If the elasticity of demand for computers is -2.0, and any price increase for the OS is "passed through" to consumers in the price of the computer, then the elasticity of demand for the operating system is approximately -0.1.

Explanation / Answer

This answer is False, Since the elasticity of demand for the computer itself is very inelastic, it outweighs the elasticity of the OS. Additionally, when looking at these two goods as complimentary goods, on must be elastic and the other inelastic. In our case, we know the computer is very inelastic therefore, we can infer the elasticity of the OS must be a positive number. Hope this helps

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.