Sandra consumes two goods: tea and coffee.Her demand for tea is inelastic,while her demand for coffee is elastic.If there is an increase in the price of both tea and coffee,________.

Question

Quizplus · Accepted Answer

Since Sandra's demand for tea is inelastic, an increase in price will lead to a proportionately smaller decrease in quantity demanded, leading to an increase in expenditure. On the other hand, since her demand for coffee is elastic, an increase in price will lead to a proportionately larger decrease in quantity demanded, leading to a decrease in expenditure. Therefore, her expenditure on tea will increase while her expenditure on coffee will decrease.

Sandra Consumes Two Goods: Tea and Coffee