If the price of cut flowers increases five percent, and the quantity demanded of cut flowers falls four per cent, then:

Question

Quizplus · Accepted Answer

The fact that the quantity demanded only falls four percent in response to a five percent price increase indicates that cut flowers are price inelastic, meaning that consumers are not very sensitive to changes in price. If cut flowers were a luxury good, we would expect the quantity demanded to fall by a greater percentage, as people would be more likely to cut back on spending for luxury items during times of high prices. Similarly, if cut flowers were a complementary good (one that is often purchased along with another product, such as flowers and vases), we would expect the price increase to have a bigger impact on demand. Therefore, C is the best choice.

If the Price of Cut Flowers Increases Five Percent, and the Quantity