Question

If the demand for bread is ___________, a decrease in its price will lead to a fall in consumers’ total expenditure on bread.

(1) unitary elastic

(2)perfectly inelastic

(3) elastic

(4) inelastic

• A. (1) and (2) only
• B. (1) and (3) only
• C. (2) and (4) only
• D. (3) and (4) only

Answer 1

The correct option is C

(2) and (4) only

Option (2) is correct: When the demand for bread is perfectly inelastic, a decrease in its price will not lead to an increase in its quantity demanded. Consumers’ total expenditure on bread will then fall. ‧Option (4) is correct: When the demand for bread is inelastic, the percentage decrease in its price will be greater than the percentage increase in its quantity demanded. Consumers’ total expenditure on bread will also fall.