When pricing automobiles, American car companies typically charge a much higher percentage markup over cost for "luxury option" items (such as leather trim, etc.) than for the car itself or for more "basic" options such as power steering and automatic transmission. Explain why.
Basic options cost automobile companies substantially less than luxury options.
Luxury options have a lower price elasticity of demand than basic options.
Luxury options have a higher price elasticity of demand than basic options.
Basic options are in greater supply than the luxury options.
Basic options are standard and therefore customers are unwilling to pay a premium for them.
C. Luxury options have a... View the full answer
Sign up to view the full answer
C. Luxury options have a higher price elasticity of demand than basic options. The quantity demand for luxury goods... View the full answer