Scenario 5-2 The Supply of Aged Cheddar Cheese Is Inelastic,and the Supply

question 39

Multiple Choice

Scenario 5-2
The supply of aged cheddar cheese is inelastic,and the supply of bread is elastic.Both goods are considered to be normal goods by a majority of consumers.Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-2.The change in equilibrium price will be

• A) greater in the aged cheddar cheese market than in the bread market.
• B) greater in the bread market than in the aged cheddar cheese market.
• C) the same in the aged cheddar cheese and bread markets.
• D) may be greater in either the aged cheddar cheese market or the bread market.

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Definitions:

Concave

Describes a shape or curve that is curved inward, resembling the inner surface of a sphere or circle.

Indifference Curves

Graphical representations showing combinations of goods or services that give a consumer equal satisfaction and utility.

Demand Curve

A graph showing the relationship between the price of a good or service and the quantity of it that consumers are willing to purchase at different prices.

Supply Curve

A graphical representation that shows the relationship between the price of a good or service and the quantity supplied.