Recently, much of the Western U.S. experienced drought conditions and water usage was restricted in Denver. Yet, even though most people used less water, the price of water did not drop. When the drought was declared over, the water company raised water prices. However, the residents of Denver did not use less water. Here, water is
A)price elastic.
B)price sensitive.
C)price inelastic.
D)price insensitive.
E)unitary elastic.

Question

Quizplus · Accepted Answer

The fact that the price of water did not drop when people used less water during the drought and that the water company was able to raise prices after the drought was over suggests that demand for water is relatively insensitive to changes in price. Therefore, water is considered price inelastic in this scenario.

Recently, Much of the Western U