All other things being equal, the __________ the percentage of one's budget spent on a good, the __________ the price elasticity of demand.
A)greater; higher
B)smaller; lower
C)greater; lower
D)smaller; higher
E)a and b

Question

Quizplus · Accepted Answer

The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good. It tends to be higher (more elastic) for goods that constitute a larger portion of a consumer's budget because consumers are more sensitive to price changes for such goods. Conversely, if a good represents a smaller portion of the budget, the demand is less sensitive to price changes (more inelastic). Thus, both A and B are correct.

All Other Things Being Equal, the __________ the Percentage of One's