A 20 percent increase in the price of sugar reduces sugar consumption by about 10 percent. Such a price increase causes households to
A) spend less on sugar.
B) spend more on sugar.
C) spend the same amount on sugar as before.
D) consume more goods like coffee and tea, which are sugar complements.

Question

Quizplus · Accepted Answer

The price elasticity of demand for sugar is inelastic (less than 1), meaning the percentage decrease in quantity demanded is less than the percentage increase in price. Therefore, total expenditure on sugar increases.

A 20 Percent Increase in the Price of Sugar Reduces