Assume SeatComfy Inc. estimates the demand for its table chairs to be Q = 5,000 - 25P
Question:
Assume SeatComfy Inc. estimates the demand for its table chairs to be Q = 5,000 - 25P + 4I +10PA - 15 PT, where P = the price of SeatComfy's chairs; PA = average price of competitors' chairs; PT = price of tables; and I = average income of SeatComfy's customers. Which of the following is true?
A. SeatComfy's chairs are inferior goods; SeatComfy's chairs and tables are complements, while SeatComfy's and competitors' chairs are substitutes. SeatComfy's sales decrease by 250 units for each $10 increase in their own price.
B. SeatComfy's chairs are normal goods; SeatComfy's and competitors' chairs are substitutes, while SeatComfy's sales are not affected by the pricing decisions of table producers. SeatComfy's sales increase by 50 percent if the price decreases by $2.
C. SeatComfy's chairs are normal goods; SeatComfy's chairs and tables are complements, while SeatComfy's and competitors' chairs are substitutes. SeatComfy's sales decrease by 25 units as price increases by $1.
D. SeatComfy's chairs are normal goods; SeatComfy's chairs and tables are complements, while SeatComfy's and competitors' chairs are substitutes. SeatComfy's sales decrease by 250 units as price increases by $1.
Operations Management in the Supply Chain Decisions and Cases
ISBN: 978-0073525242
6th edition
Authors: Roger Schroeder, M. Johnny Rungtusanatham, Susan Goldstein