An important determinant of the price elasticity of demand is the:
A)proportion of the household budget spent on the good.
B)level of technology.
C)quantity of the good supplied.
D)extent of government regulation.

Question

Quizplus · Accepted Answer

The proportion of the household budget spent on the good is an important determinant of the price elasticity of demand because it indicates how important the good is to the consumer. If a large portion of the budget is spent on the good, consumers are likely to be more sensitive to changes in the price and the demand will be more elastic. Conversely, if a small portion of the budget is spent on the good, consumers are likely to continue buying the good even if the price increases, making the demand less elastic.

An Important Determinant of the Price Elasticity of Demand Is