What does a 14 percent increase in the price of cheddar cheese leading to a 22 percent decrease in quantity demanded indicate?

A 14 percent increase in the price of cheddar cheese resulting in a 22 percent decrease in quantity demanded indicates that the demand for cheddar cheese is elastic. This means that consumers are relatively responsive to price changes—in this case, when the price rises, they significantly reduce the quantity they are willing to buy.

To determine elasticity, economists often look at the percentage change in price relative to the percentage change in quantity demanded. If the percentage change in quantity demanded is greater than the percentage change in price, the demand is considered elastic. In this instance, the decrease in quantity demanded (22 percent) is significantly larger than the increase in price (14 percent).

This strong response from consumers implies that cheddar cheese may have substitutes or may not be a necessity, leading consumers to reduce their consumption when prices rise. Thus, the significant drop in quantity demanded in response to a moderate price increase confirms that the demand for cheddar cheese is elastic.