If a third party pays a larger and larger share of the purchasing price of a good, economic theory indicates that
A) the total expenditures (including those made by the third party) on the good will decline.
B) the demand for the good will decrease.
C) consumers will have a stronger incentive to economize on their use of the good.
D) suppliers will have less incentive to provide the good at low prices.

Question

Quizplus · Accepted Answer

When a third party covers a larger portion of the cost, consumers are less sensitive to price, leading suppliers to have less incentive to keep prices low, as demand becomes less elastic.

If a Third Party Pays a Larger and Larger Share