A Local Krispy Kreme Doughnut Shop Reduced the Price of Its

question 188

Multiple Choice

A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was

• A) elastic.
• B) inelastic.
• C) of unitary elasticity.
• D) indeterminate; more information is needed to determine the price elasticity of demand.

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Definitions:

Slope

In mathematics, it refers to the steepness or incline of a line, indicating the rate at which y-values change with respect to x-values.

Budget Constraint

The limits imposed on household choices by income, wealth, and product prices.

Choice Set

The collection of all possible options available for selection by a decision-maker.

Leftover Income

The amount of income that remains after all necessary expenses, such as bills and living costs, have been paid.