Near the end of the summer season,Sergio still has a large inventory of bathing suits.He needs to sell them rather than holding them over till next season,because colors and styles often change.He plans to offer them at 30 percent off the retail price.Sergio hopes that demand for bathing suits at the end of the season is
A) cross-price elastic.
B) price inelastic.
C) price elastic.
D) status quo elastic.
E) derived demand inelastic.

Question

Quizplus · Accepted Answer

When Sergio offers a discount of 30 percent, customers may be more motivated to buy the bathing suits because they are getting a better deal. This means that the change in quantity demanded will be more than the change in price, resulting in a relatively large elasticity of demand. Therefore, the demand for bathing suits at the end of the season is likely to be price elastic.

Near the End of the Summer Season,Sergio Still Has a Large