Answered: A clothing accessory company produces…

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter7: Consumer Choice And Elasticity

Section: Chapter Questions

Problem 5CQ: Estimates presented in Exhibit 5 show that Android users have a higher price elasticity of demand...

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Question

A clothing accessory company produces scarves and earrings. Below are the production
possibility combinations it can produce with the resources it has.
i.
ii.
Scarves ('000 units)
10
9
8
7
6
5
4
3
2
1
0
Earrings ('000 units)
0
50
90
120
145
165
185
200
215
225
230
Using the data in the table, graph the production possibility curve (with earrings on
the vertical axis).
Do the principles of "increasing opportunity cost" hold in this nation? Explain using
information provided in the table above.

Transcribed Image Text:Gasoline and Apparel at Opposite Ends of Elasticity Equation By Alex Carrick August 26, 2020, Daily Commercial News. An interesting sidebar to the coronavirus story has been seeing how elastic prices are to dramatic shifts in retail sales and other high-profile categories of economic activity (e.g., in the travel sector). Wider than usual percentage changes have made relationships more apparent. For July 2020, the U.S. 'All-items' Consumer Price Index (CPI) was +1.0% year over year, with the 'core' rate of increase at +1.6%. (The 'core' rate eliminates items in the CPI 'basket' that have a history of extreme volatility, mainly in the energy and food spheres.) It's in specific consumer product categories, however, where the most fascinating results are to be found. For starters, the retail sales of gasoline stations in July were -15.6% year over year. Much of the explanation lies in the fact the price of gasoline in America in the same month was -20.3% year to year. The sales of 'clothing and accessory stores' on the hand, performed better with an increase in sales by 20.9% year to year despite the fall in the CPI index by -6.5% year to year. Discounts are being offered in the hopes of driving more sales.

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