Scenario 5-1
Suppose that the supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-1. The price elasticity of supply for bread could be
A) -1.
B) 0.
C) 0.5.
D) 1.5.
Correct Answer:
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