A 10 percent increase in the price of sugar reduces sugar consumption by about 5 percent. The increase causes households to
A) spend more on sugar.
B) spend less on sugar.
C) spend the same on sugar.
D) consume more goods like coffee and tea that are complements of sugar.

Question

Quizplus · Accepted Answer

The price elasticity of demand for sugar is inelastic (less than 1), so the percentage decrease in quantity demanded is less than the percentage increase in price, leading to an increase in total expenditure on sugar.

A 10 Percent Increase in the Price of Sugar Reduces