Question

Suppose we observe that as the price of lettuce increases from $1 to $2 per head, consumers buy only half the number of heads of lettuce. This situation is best described as _________.

a. an increase in demandb. a decrease in demandc. a decrease in the quantity demandedd. an increase in supplye. an increase in the quantity supplied

Answer 1

C. A decrease in the quantity demanded

Step-by-step explanation:

Price Elasiticity

The law of demand and supply would usually hold that an increase in prices will result in a decrease in demand. Furthermore, an increase in demand generates a corresponding increasing in supply as well.

When the demand of a product is sensitive to the changes in price, then we say that price of the product is elastic but if the product demand not strongly influenced by price then we say that the pricing is inelastic.

In the case of the lettuce, we can say that the price is elastic, because there is a sensitive reaction between an increase in price from $1 to $2 which immediately leads to a halfing of the quantity demanded. The price is elastic such that an increase in price leads to a decrease in quantity demanded.