Sally is an average shopper, with average income. When she is in the store she buys a few items which cost more than $20, several items which cost between $5 and $20, and many items which cost less than $1. The price elasticity of Sally's demand for these goods most likely ____.
A) increases as the price decreases
B) decreases as the price decreases
C) increases as the price increases
D) decreases as the price increases
E) remains constant over all price ranges

Question

Quizplus · Accepted Answer

Price elasticity of demand tends to increase as the price increases because consumers are more sensitive to price changes for more expensive items.

Sally Is an Average Shopper, with Average Income