When the Price of a Good Increased by 6 Percent

question 113

Multiple Choice

When the price of a good increased by 6 percent, the quantity demanded of it decreased 3 percent. Most likely, this good ________ and ________.

• A)is a necessity; has poor substitutes
• B)has poor substitutes; is a luxury
• C)is a necessity; has good substitutes
• D)is a luxury; is narrowly defined
• E)is a luxury; has experienced a recent price change

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Definitions:

Price-Inelastic

A characteristic of a product or service when consumers’ demand does not change significantly with a change in its price.

Agricultural Product

Any type of product, including food, fibers, fuels, and raw materials, that is derived from farming and ranching.

Price Elasticity of Demand

A determination of demand's sensitivity to pricing shifts of a product.

Agricultural Risk Coverage Program

A U.S. government program that provides financial assistance to agricultural producers when crop revenues or yields fall below guarantee levels.