4

QUESTION 1 Marissa is a supplier of drinking water in her village. She sells around 120 gallons of drinking water at the price of $1.05/gallon. The country that she lives in suddenly experiences a water shortage. Therefore, Marissa's supply of drinking water decreases and the price for 1 gallon of water increases to $4/gallon. The percentage change in the quantity demanded for her drinking water did not change at all even with the rise in price. Which of the following statements is true? O The demand curve for Marissa's drinking water is upward sloping. The price elasticity of demand for Marissa's drinking water is greater than 1. The price elasticity of demand for Marissa's drinking water is equal to O. A 1% increase in the price for Marissa's drinking water would lead to a lesser than 1% increase in the quantity demanded. Since water is an essential good, it is relatively more elastic than non-essential goods