A firm that attempts to pass along the cost of higher union wages to consumers in the form of higher prices will be more successful if the price elasticity of demand for its product is

Question

Quizplus · Accepted Answer

If the price elasticity of demand for the firm's product is inelastic, then consumers will not be very responsive to changes in price. This means that if the firm raises prices to cover the cost of higher union wages, consumers are more likely to continue purchasing the product rather than seeking alternative options. Inelastic demand will allow the firm to pass along the cost to consumers without experiencing a significant drop in sales.

A Firm That Attempts to Pass Along the Cost of Higher