53. A local coffee shop is facing inelastic demand for its coffee so the manager decreases the price of coffee by 5%. What will happen to the quantity demanded for this shop's coffee?
Answer: A
The quantity demanded will increase by less than 5%
Since the coffee shop is facing inelastic demand, a decrease in price will lead to an increase in the quantity demanded, but the increase will be proportionally smaller than the price decrease.
A) Increases by less than 5%
This option is correct because inelastic demand indicates that the percentage change in quantity demanded is less than the percentage change in price. With a 5% decrease in price, the quantity demanded will increase, but by an amount less than 5%.
B) Decreases by less than 5%
This option is incorrect as it suggests that the quantity demanded will decrease, which contradicts the nature of inelastic demand. If the price decreases, the quantity demanded cannot decrease in this scenario.
C) Increases by more than 5%
This option is incorrect because it implies that the quantity demanded is responsive to price changes in an elastic manner. Inelastic demand means the increase in quantity demanded will be less than the price reduction percentage.
D) Decreases by more than 5%
This option is incorrect as it suggests a significant decrease in quantity demanded upon a price decrease, which is not consistent with inelastic demand. Lower prices should not lead to a decrease in demand.
Conclusion
The correct answer is A, as it aligns with the characteristics of inelastic demand where changes in price lead to proportionally smaller changes in quantity demanded. Options B, C, and D fail to accurately reflect the behavior of demand when faced with a price decrease in an inelastic context.