An increase in the price of computer diskettes leads to an increase in total expenditures on the diskettes. Which of the following is true for this price change?
A) Computer diskettes are an inferior good.
B) The demand for computer diskettes is perfectly elastic.
C) The demand for computer diskettes is inelastic.
D) The demand for computer diskettes is elastic.

Question

Quizplus · Accepted Answer

When the price increase leads to an increase in total expenditures, it indicates that the demand is inelastic, meaning consumers are not significantly reducing their quantity demanded despite the price increase.

An Increase in the Price of Computer Diskettes Leads to an Increase