A Decrease in Supply Will Cause the Smallest Increase in Price

question 184

Multiple Choice

A decrease in supply will cause the smallest increase in price when

• A) both supply and demand are inelastic.
• B) demand is elastic and supply is inelastic.
• C) both supply and demand are elastic.
• D) demand is inelastic and supply is elastid.

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Definitions:

Cost of Goods Sold

Costs directly linked to the manufacturing of products sold by a business, encompassing the expenses of materials and labor specifically employed in the product's production.

Gross Profit

The difference between sales revenue and the cost of goods sold before deducting overheads, payroll, taxation, and interest payments.

Periodic Inventory System

An inventory accounting system where stock levels are updated at regular intervals, not continuously.

Gross Profit

Gross profit is the difference between sales revenue and the cost of goods sold, indicating how efficiently a company is producing or sourcing its products.