When a consumer spends a larger share of her income on a particular good,the price elasticity of demand for that good ________.
A) increases
B) decreases
C) initially decreases and then increases
D) remains the same

Question

Quizplus · Accepted Answer

When a consumer spends a larger share of their income on a particular good, the good becomes more important to the consumer, and therefore they become more sensitive to changes in the price of that good. As a result, the price elasticity of demand for that good increases.

When a Consumer Spends a Larger Share of Her Income