The larger the proportion of the consumer's budget that is spent on a product, the more elastic that consumer's demand for the product will be.

Question

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This is because when a larger proportion of the budget is spent on a product, a change in price will have a greater impact on the consumer's overall purchasing power, making them more likely to switch to a substitute product or reduce their consumption of the product altogether.

The Larger the Proportion of the Consumer's Budget That Is