If the demand for a product is price inelastic,
A)producers' revenues will increase if supply increases
B)producers' revenues will increase if supply decreases
C)a small change in price will cause a large shift in the demand curve
D)a large change in price will cause a small shift in the demand curve
E)a small change in price will cause a small shift in the demand curve

Question

Quizplus · Accepted Answer

If the demand for a product is price inelastic, a change in price will not significantly affect the quantity demanded. Therefore, if supply decreases, the producers can charge a higher price, which would increase their revenue. On the other hand, if supply increases, the producers would have to lower the price to sell the same quantity, so their revenue would decrease.

If the Demand for a Product Is Price Inelastic