Question

Chantel, a resident of Denver, Colorado, decided to open up her own fine jewelry store. To do so, she used her life savings and a loan from the bank. Chantel was able to open up a store with sufficient inventory. She markets the jewelry as the "finest jewelry in the West." The most popular item Chantel sells is a rose gold bracelet that sells for $550. During one month, Chantel's fixed costs are $6,000. Her variable costs average about $400.Chantel decided to raise the price of her rose gold bracelets even higher to $750. To her surprise, though, demand went down. Based on this information, the rose gold bracelets are most likely aA. competitiveB. fixed productC. elasticD. prestige product

Answer 1

Answer:

C) elastic

Explanation:

Usually the price elasticity of demand for luxury products is very elastic, that means that for every 1% that the product increases its price, its quantity demanded will decrease in a higher proportion (more than 1%).

In this case, since Chantel increased the price of her rose gold bracelets, her sales decreased. We are not told how much they decreased, but we can assume by the type of product that the decrease was severe.