A decrease in the supply of a good will cause a larger increase in its price:
A)the more elastic the demand for that good.
B)the greater the scarcity of that good.
C)if there are many close substitutes for that good.
D)the more inelastic the demand for that good.

Question

Quizplus · Accepted Answer

When demand for a good is inelastic, it means that consumers are not very responsive to changes in price. Therefore, if there is a decrease in supply, there will be a larger increase in price because consumers are still willing to pay a higher price for the same quantity of the good. On the other hand, if demand is very elastic, consumers are very responsive to changes in price and may choose to switch to a substitute good, resulting in a smaller increase in price.

A Decrease in the Supply of a Good Will Cause