Firms engage in odd pricing when they charge prices that appear to be less than they really are; for example, charging a price of $4.95 instead of $5.00 and $.99 instead of $1.00
How have researchers tried to determine whether odd pricing is successful in convincing consumers that odd prices are less than they really are?
Three researchers used surveys to answer this question. Survey results are inferior to actual purchasing behavior because surveys only determine what respondents state they will do and not what they actually do. Still, the surveys revealed that odd pricing may succeed in creating their intended illusion. The researchers asked survey respondents about their willingness to purchase six different products at a series of prices. Ten prices were odd prices. Out of the ten odd prices nine resulted in a quantity demanded that was greater than had been predicted using an estimated demand curve. This is evidence that charging odd prices makes sense for firms.
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Governments run a balanced budget when
A) their debt is interest-free. B) transfer payments equal zero. C) revenues equal spending. D) revenues exceed spending.
What happens in the steady state to the capital—labor ratio, output per worker, and consumption per worker when each of the following events occur? You should assume that the steady-state capital—labor ratio is below the Golden Rule level
(a) Productivity falls. (b) Population growth falls. (c) The saving rate falls. (d) The depreciation rate falls.
Initially, the economy is at point G in Figure 10-4 above. An increase in per capita savings from s(0 ) to s(1 ) will in the short run result in ________ and in the long run result in ________
A) excess per capita saving; more rapid growth in per capita output B) excess per capita saving; less rapid growth in per capita output C) more rapid growth in per capita output; more rapid growth in per capita output D) more rapid growth in per capita output; no change in the long run rate of growth in per capita output
If the graph shown represents Heather's budget constraint, and the price of hairbands were to decrease, the slope of Heather's budget constraint would become:
A. flatter, reflecting the fact that hairbands are now relatively less expensive.
B. steeper, reflecting the fact that hairbands are now relatively more expensive.
C. flatter, reflecting the fact that earrings are now relatively less expensive.
D. steeper, reflecting the fact that earrings are now relatively more expensive.