Question

The price of coffee fell sharply last month, while the quantity sold remained the same. Five people suggest various explanations: Antonio: Demand decreased, but it was perfectly inelastic. Caroline: Demand decreased, but supply was perfectly inelastic. Dmitri: Demand decreased, but supply increased at the same time. Frances: Supply increased, but demand was perfectly inelastic. Jake: Supply increased, but demand was unit elastic. Who could possibly be right? Check all that apply.

Rajiv
Simone
Yakov
Ana
Charles

Answer 1

France. True Supply increased and demand did not adapt

Step-by-step explanation:

If the price of coffee decreases it may be due to two causes

- Increase of the offer

- decrease in demand

- both simultaneously.

Let's examine the statement. They tell us that the amount sold remained constant, so there is no decrease in demand, therefore the only cause may be the increase in supply.

Let's check the answers

Antonio False. The demand is constant.

Carolina. False. The demand is constant.

Dmitri False. The demand is constant.

France. True Supply increased and demand did not adapt

Jake. False. Demand did not adapt to the increase in supply