One of the factors that impact the price elasticity of demand is the availabilit
ID: 373384 • Letter: O
Question
One of the factors that impact the price elasticity of demand is the availability of substitutes. If a product has many substitutes then its demand is tends to be elastic while a product that have fewer substitutes tends to have inelastic demand.
If we take the case of blue jeans in general, a product category, then it can be seen that there are few substitutes to blue jeans in general whereas Levi’s brand jeans has many substitutes in terms of blue jeans of other brands like Lee, Armani, True Religion etc.
Since, blue jeans in general has fewer substitutes, demand for blue jeans as a whole would be inelastic.
On the other hand, Levi’s brand blue jeans has many substitutes. So, demand for it will be elastic. In other words, its demand will be more elastic than demand for blue jeans in general.
More elastic the demand for a good, larger is the absolute value of price elasticity of demand for such good.
So, due to more elastic demand, the price elasticity of demand in absolute value to be larger for Levi's brand blue jeans that for blue jeans in general.
Hence, the correct answer is option (B).
Explanation / Answer
Neal Industries manufactures blue jeans for the teen market. The S&OP; team has agreed upon a demand forecast for the following year, as shown below. The company begins with 1,200,000 jeans in safety stock and desires to maintain this level consistently (and end with this level), assume that the overtime production wage rate is $30 per hour. Quarter Demand 6,000,000 8,800,000 15,000,000 13,000,000 Current workforce Average output per worker Inventory holding cost Regular wage rate Regular production hours Hiring cost Firing/layoff cost Beginning inventory 300 workers 20,000 jeans per quarter $ 0.50 pair per quarter 20 per hour 500 hours per quarter 380 per worker 290 per worker $ $1,200,000 a. Develop a chase plan using a stable workforce of 300 workers. (Leave no cells blank be certain to enter "o" wherever required.) Regular Production Overtime Production Ending Invento Workers Required QuarterDemand Hire Fire layoff 6,000,000 8,800,000 15,000,000 13,000,000 42,800,000 Total b. Compute the cost of a chase plan using a stable workforce of 300 workers Total cost
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.