This scenario suggests that the demand for the bakery's specialty pastries is inelastic. Inelastic demand occurs when the quantity demanded remains relatively unchanged despite a price increase. Since loyal customers continue to purchase the pastries despite the rise in price, it indicates that they value the quality and flavor enough to maintain their purchases even when faced with higher costs. Therefore, the correct interpretation of this situation is that it reflects inelastic demand for the bakery's specialty pastries.
In the town of Econville, a local bakery experiences an increase in the price of its specialty pastries due to the rising cost of unique ingredients. Despite the price hike, loyal customers continue to purchase the pastries, citing their unmatched quality and flavor. What does this scenario suggest about the demand elasticity for the bakery's specialty pastries?
Elastic demand, as the quantity demanded decreases with a price increase
Perfectly elastic demand, as any price increase would result in a complete loss of customers
Inelastic demand, as the quantity demanded remains relatively unchanged despite the price increase
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