Question

A firm that attempts to pass along the cost of higher union wages to consumers in the form of higher prices will be more successful if the price elasticity of demand for its product is

Answer 1

Inelastic

Step-by-step explanation:

The consumers are very responsive to a change in price if the elasticity of demand for the product is elastic while they are not very responsive if the elasticity of demand for the product is inelastic. So in the case of inelastic if the price increases then the demand will not be much reduced and will result in increase in the total revenue.

Hence, a firm is more successful in passing the high cost to the consumer if the demand is inelastic.