Question

Catalog companies are committed to selling at the prices printed in their catalogs.

If a catalog company finds its inventory of sweaters rising, what does that tell you about the demand for sweaters?
Demand for sweaters is .
If the company could change the price of sweaters, would it raise the price, lower the price, or keep the price the same?
The company would .
Given that the company cannot change the price of sweaters, consider the number of sweaters it orders each month from the company that makes its sweaters. If inventories become very high, will the catalog company increase, decrease, or keep orders the same?
The catalog company will .
Given what the catalog company does with its orders, what is likely to happen to employment and output at the sweater manufacturer? Employment will and output will .

Answer 1

A rising inventory of sweaters suggests low demand. Unable to change prices, the catalog company would reduce orders, leading to decreased employment and output at the sweater manufacturer.

Step-by-step explanation:

If a catalog company finds its inventory of sweaters rising, this indicates that the demand for sweaters is low compared to the supply. As the law of supply and demand dictates, if they could change the price, the company would likely lower the price to increase demand and reduce inventory. Since the company is committed to their catalog prices, they cannot change the price. Thus, if inventories become very high, the catalog company will likely decrease orders from the manufacturer to reduce the inventory glut.

Given the decrease in orders by the catalog company, the sweater manufacturer will likely see a decrease in employment and output. This is because the manufacturer will not need as many workers or to produce as much if their largest orders are shrinking.

Answer 2

Demand for sweaters is reduced.

The company would lower the price.

The catalog company will decrease the orders.

Employment and output will decrease.

Step-by-step explanation:

An increase in inventory means that fewer sweaters are being sold. This implies that the demand for sweaters has declined.

The company cannot change the price since it has to sell on the price mentioned in the catalog. But it would lower the price to increase the quantity demanded if it could.

The company would instead decrease the orders of sweaters that were being supplied from manufacturers. a decrease in orders will cause the manufacturers to produce less, thus decreasing employment and output at the sweater manufacturer.