Scenario 5-4 the Supply of Aged Cheddar Cheese Is Inelastic, and the and the Supply

question 393

Multiple Choice

Scenario 5-4
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 5-4. The equilibrium price will

• A) increase in both the aged cheddar cheese and bread markets.
• B) increase in the aged cheddar cheese market and decrease in the bread market.
• C) decrease in the aged cheddar cheese market and increase in the bread market.
• D) decrease in both the aged cheddar cheese and bread markets.

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