Question

Suppose the company that owns the vending machines on your campus has doubled the price of a can of soda and yet they sell almost the same number of sodas per day as before. This suggests:

Answer 1

Answer:

These are the answer choices for the question:

Students do not have good nutritional information.

Soda purchases represent a large fraction of students' budgets.

There are few other places to purchase soda on campus.

The price elasticity of demand for soda is equal to 1.

And this is the correct answer choice:

There are few other places to purchase soda on campus.

Explanation:

If vending machines raise the price of soda by two, by the still sell almost the same amount, this means that they have a monopoly over the selling of soda in campus, and that students continue to buy there because they do not have any other feasible alternatives.

This is the problem with monopolies: they can charge very high prices and still make a profit because they will always have demand, but this very act makes consumers worse off, and reduces general social welfare.