If the Demand Schedule for Bauxite Is Relatively Inelastic to Price

question 206

Multiple Choice

If the demand schedule for bauxite is relatively inelastic to price changes,an increase in the supply schedule of bauxite will cause a:

• A) Decrease in price and a decrease in sales revenue
• B) Decrease in price and an increase in sales revenue
• C) Increase in price and a decrease in sales revenue
• D) Increase in price and an increase in sales revenue

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Definitions:

Utility Function

This describes a formula used in economics to quantify the happiness or satisfaction obtained by a consumer from consuming goods and services.

Substitution Effect

The alteration in how goods are consumed as a result of shifts in relative prices, while maintaining the same level of satisfaction for the consumer.

Giffen Good

A product that sees an increase in demand as its price rises, contrary to the law of demand, typically due to the absence of close substitutes and the product being an inferior good.

Perfect Complements

Goods that are consumed together in fixed proportions, where the utility of one item increases with the consumption of the other.