The price of milk rises, so the supply of ice cream decreases. there is, as a result a 5 percent increase in the price of ice cream and a 3 percent decrease in the quantity of ice cream sold. The revenue received by ice cream suppliers will ________ because the demand for ice cream is ________.
A) decrease; price inelastic
B) increase; price inelastic
C) increase; price elastic
D) decrease; price elastic

Question

Quizplus · Accepted Answer

The revenue will increase because the percentage increase in price (5%) is greater than the percentage decrease in quantity sold (3%), indicating that demand is price inelastic.

The Price of Milk Rises, So the Supply of Ice