Question

Use the following scenario to answer the questions that follow:

Dairy Dream, a local ice cream store, finds that it sells out of ice cream sandwiches at the current price of $1. It raises the price to increase its revenues and finds that no one buys ice cream sandwiches anymore.
The demand for ice cream sandwiches is:
a.inelastic.
b.elastic.
c.perfectly inelastic.
d.perfectly elastic.
e.unitary elastic.

Answer 1

Answer:d.perfectly elastic

Step-by-step explanation:

What is a perfectly elastic demand ?

A perfectly elastic demand is the one in which increasing of the product price result to fall of the demand to zero and decreasing the price doesn't mean sales will rise or increase.

Companies or businesses which has a perfectly elastic product are in a market where there are many people who sell the similar products. These are usually very small business.

The customers are usually drawn to the product based on the price which means the companies need to embrace the market price or just quit the business because the price is what it is in the market and most similar business adopt it and people have plenty of options to choose from.