Suppose that the supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
1. The price elasticity of supply for aged cheddar cheese could be
A. 0.5.
B. 0.
C. -1.
D. 1.5.
2. The price elasticity of bread could be
A. 0.
B. 0.5.
C. -1.
D. 1.5