price, but the benefit is greater when demand is inelastic, as in (a).

Aspirin producers may find themselves in a nasty bind here. The situation in Figure 5.8, with extremely

inelastic demand, means that a new invention may cause the price to drop dramatically while quantity

changes little. As a result, the new production technology can lead to a drop in the revenue that firms earn

from aspirin sales. However, if strong competition exists between aspirin producers, each producer may have

little choice but to search for and implement any breakthrough that allows it to reduce production costs. After

all, if one firm decides not to implement such a cost-saving technology, other firms that do can drive them out

of business.

Since demand for food is generally inelastic, farmers may often face the situation in Figure 5.8 (a). That is, a
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