If consumers spend more money on coffee than on sugar, then the demand for a pound of coffee is likely _____ price elastic than the demand for a pound sugar of because _____.
A) less; coffee requires a larger portion of consumers' incomes
B) more; coffee requires a larger portion of consumers' incomes
C) less; consumers will take a longer time to adjust to a change in the price
D) more; consumers will take a longer time to adjust to a change in the price

Question

Quizplus · Accepted Answer

If consumers spend more money on coffee than on sugar, then it is likely that they view coffee as a more important, or necessary, product than sugar. This means that they are likely more willing to change the quantity of sugar they purchase in response to a change in price, making the demand for sugar more price elastic. On the other hand, consumers may be less willing to change the quantity of coffee they purchase in response to a change in price, since it is a more important product to them. This makes the demand for coffee less price elastic. Therefore, option B is the correct choice.

If Consumers Spend More Money on Coffee Than on Sugar