Suppose a decrease in the supply of bottled water results in a decrease in revenue.This indicates that
A)the demand for bottled water is inelastic in the price range considered.
B)the demand for bottled water is elastic in the price range considered.
C)the supply of bottled water is inelastic in the price range considered.
D)the supply of bottled water is elastic in the price range considered.

Question

Quizplus · Accepted Answer

A decrease in supply leading to a decrease in revenue indicates that the demand for bottled water is sensitive to changes in price, i.e., elastic. Therefore, if the supply of a product decreases and the revenue falls, it implies that the consumers are either reducing their purchases or switching to alternatives due to the price hike. This is true in the price range considered, and hence, option B is the correct choice.

Suppose a Decrease in the Supply of Bottled Water Results