When the price of sugar was "low," U.S.consumers spent a total of $3 billion annually on sugar consumption.When the price doubled,consumer expenditures increased to $5 billion annually.This data indicates that:
A) the demand for sugar is inelastic.
B) the demand curve for sugar is upward sloping.
C) the quantity demanded of sugar increased.
D) the demand curve for sugar is upward sloping and the quantity demanded of sugar increased.

Question

Quizplus · Accepted Answer

The fact that an increase in price led to only a relatively small decrease in quantity demanded (from $3 billion to $5 billion) suggests that demand for sugar is relatively inelastic. If demand was very responsive to price changes, a doubling of the price would have led to a much larger decline in consumer expenditures. B and D are incorrect because the data does not give us any information about the slope of the demand curve. C is incorrect because the data shows an increase in consumer expenditures, but we cannot assume that this means an increase in quantity demanded without more information about the exact relationship between price and quantity.

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