When demand is inelastic, prohibition results in driving down prices and significantly reducing demand.

Question

Quizplus · Accepted Answer

When demand is inelastic, prohibiting a good or service typically results in a small reduction in demand but a significant increase in prices. This is because consumers are willing to pay a higher price for the good or service despite the prohibition, as there are few substitutes available. It is only when demand is elastic that prohibiting a good or service will result in a substantial decrease in demand and lower prices.

When Demand Is Inelastic, Prohibition Results in Driving Down Prices