If a good (like most fruit) has elastic demand, then which statement is NOT likely to be true?
A)It is a luxury good and represents a large proportion of the household budget.
B)It has many substitutes.
C)Consumers spend a small percentage of their income on it.
D)Consumers have time to adjust to market changes.

Question

Quizplus · Accepted Answer

If a good has elastic demand, it means that consumers are sensitive to changes in price and are likely to switch to substitutes or reduce consumption if the price increases. Therefore, it is unlikely that a good with elastic demand is a luxury good that represents a large proportion of the household budget. Instead, it is more likely that consumers spend a small percentage of their income on it and have many substitutes to choose from. Additionally, consumers with elastic demand have time to adjust to market changes, meaning that they have the luxury of exploring different options if the price of one good changes.

If a Good (Like Most Fruit) Has Elastic Demand, Then