An increase in subway fares in New York City will boost your expenditures on subway rides if

• A. The supply of subway rides is elastic.
• B. The supply of subway rides is inelastic.
• C. Your demand for subway rides is inelastic.
• D. Your demand for subway rides is elastic.

Answer: (C)

Total spending on a good in response to a price increase depends on your demand elasticity. If subway fares rise and your demand is inelastic, you don’t reduce your rides by much, so the higher price times almost the same quantity leads to higher total spending. If your demand were elastic, you'd cut back a lot on rides, and total spending could fall or barely rise. The elasticity of supply isn’t the deciding factor for a single consumer’s expenditures here; it describes how easily suppliers can adjust quantity, not how a consumer’s purchases respond to a price change. So inelastic demand best explains why expenditures would rise with a fare increase.