If the countries that export bauxite form a cartel to boost the price of bauxite in order to increase sales revenue, then they believe that the demand for bauxite
A) is inelastic with respect to price changes.
B) is elastic with respect to price changes.
C) will increase in response to a price increase.
D) will not change in response to a price change.

Question

Quizplus · Accepted Answer

If the countries that export bauxite form a cartel to boost the price of bauxite, it implies that they believe that the demand for bauxite is inelastic with respect to price changes, i.e., buyers will continue to buy bauxite at the higher price without significant reduction in quantity demanded. If the demand for bauxite were elastic, a price increase would result in a significant reduction in quantity demanded, leading to a decrease in sales revenue.

If the Countries That Export Bauxite Form a Cartel to Boost