Suppose a firm in each of the two markets listed below were to increase its price by 25 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)restaurants and MP3 players
B)electricity and natural gas
C)corn and satellite radio
D)rice and soybeans

Question

Quizplus · Accepted Answer

Corn is a staple food with many substitutes, so a price increase would lead to a significant drop in sales. Satellite radio has fewer substitutes and is often seen as a luxury, so its sales would be less affected by a price increase.

Suppose a Firm in Each of the Two Markets Listed