Suppose That Chris Had Been Charging $1

question 90

Multiple Choice

Suppose that Chris had been charging $1.00 per pound for potatoes. When Chris lowered the price to $0.90 per pound, his total revenue fell. When Chris raised the price to $1.10, total revenue also fell. Which of the following could explain this?

• A)$1.00 is the equilibrium price for potatoes.
• B)At 90 cents, there is excess demand for potatoes.
• C)$1.10 is more than Chris's customers' reservation prices.
• D)The price elasticity of demand for potatoes is 1 at a price of $1.00 per pound.

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Definitions:

Inelastic Demand

Refers to a market situation where the demand for a product does not change significantly in response to a change in price.

Elastic Demand

A market scenario where the quantity demanded of a product or service significantly changes in response to a change in price.

Fast-Food

Quick service restaurants serving food that is prepared and served rapidly.

Consumer Surplus

The benefit obtained by consumers because they are able to purchase a product for a price that is less than the highest price that they would be willing to pay.