Answered

The more Inelastic the demand for a resource, the

Multiple Choice

O

less elastic its marginal revenue product curve.

more elastic its marginal revenue product curve.

greater the potential for resource substitution.

O

greater the productivity of the resource.

Verified Answer :

Answer:

The correct answer is: less elastic its marginal revenue product curve.

Explanation:

Here's why:

Inelastic demand means that the quantity demanded changes very little even with a significant price change. Consumers have limited or no substitutes for the resource, so they are forced to buy it regardless of price increases.

Marginal revenue product (MRP) represents the additional revenue generated by using one additional unit of a resource.

When demand is inelastic, a price increase will lead to a smaller decrease in quantity demanded. This means a company can raise the price without a significant drop in sales. As a result, the additional revenue generated from using one more unit of the resource (MRP) will also increase with a price hike, but the increase will be less proportional compared to a more elastic demand scenario.

Therefore, with inelastic demand, the marginal revenue product curve will be less elastic, meaning it will have a steeper slope as the price increases.

Here's why the other options are incorrect:

Greater potential for resource substitution: This is more likely with elastic demand, where consumers can easily switch to substitutes if the price of the original resource increases.

Greater productivity of the resource: Inelastic demand doesn't necessarily imply a more productive resource. It just means consumers have limited options regardless of the resource's efficiency.

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