The last time the U.S.Post Office raised its prices for mail service critics of the rate increase argued that the Post Office's revenues would actually decline as a result of the price increase.It can be concluded that:
A)both groups believe demand is elastic, but for different reasons.
B)both groups believe demand is inelastic, but for different reasons.
C)the Post Office believes demand for mail service is elastic; opponents of the price increase believe demand is inelastic.
D)the Post Office believes demand for mail service is inelastic; opponents of the price increase believe demand is elastic.

Question

Quizplus · Accepted Answer

The Post Office believes demand for mail service is inelastic because they assume that people will continue to use the service regardless of price. Meanwhile, opponents of the price increase believe demand is elastic, meaning that customers will be deterred by the higher price and seek alternative methods of communication, resulting in a decline in the Post Office's revenues.

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