How sensitive the demand for donuts is to their
Explanation of Solution
As most of the population in country A consumes donuts which indicates that the price
In the absence of mechanical wheat harvesters and other tools such as dough mixers and fryers, the price will go up to its maximum as it will take much more time to produce donuts. And, also the cost of labor will increase because, in the absence of tools, more and more workers will be needed to produce donuts which in turn increases the cost of the product. As a result of this, the price of donuts will increase at a higher rate.
Technology and employment in the industry of donuts are related to each other because an increase in technology will improve the wages of workers as by using technology in the industry, machines can provide final products at a cheap rate when compared to the production which is obtained without using technology. Therefore, an increase in employment will increase the consumption of donuts, and people prefer the goods at any price in the market. This makes the demand inelastic for the product.
Introduction: The relationship between the percentage change in a product's quantity which is demanded in the market and the percentage change in price in the market is known as price elasticity of demand. This helps to understand how supply and demand can shift in response to an increase or decrease in price.
Chapter 6R Solutions
Krugman's Economics For The Ap® Course
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