Suppose a firm in each of the two markets listed below were to increase its price by 15 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?
A)cotton and soybeans
B)gasoline and corn
C)#2 lead pencils and college textbooks
D)electricity and cable television

Question

Quizplus · Accepted Answer

#2 lead pencils are likely to have many substitutes, leading to a dramatic decline in sales with a price increase, whereas college textbooks have fewer substitutes, so sales may not decline as much.

Suppose a Firm in Each of the Two Markets Listed