The Yankee Candle Company, in Hatfield, Massachusetts, makes thousands of scented candles each day. The factory emits the odor of the candles it produces, some of which smell quite nice. On days when they make strawberry candles the townspeople really enjoy the smell. On days when they make potpourri scented candles, people close their windows and don't go outside. What can we infer about the scented candle market?

Question

Quizplus · Accepted Answer

We can infer that the market for scented candles is not homogeneous, and different types of candles have different levels of desirability for consumers. The fact that people enjoy the smell of strawberry candles but dislike the smell of potpourri candles suggests that there is a market for both types of products. We cannot infer anything about pricing or externalities from this information. The efficiency of candle production technologies is also not addressed.

The Yankee Candle Company, in Hatfield, Massachusetts, Makes Thousands of Scented