Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P x . Assume that P = $8, I = 200, and P x = $10.
-If a consumer is spending a small portion of his or her income on a good, then the demand for the good is likely to be inelastic.

Question

Quizplus · Accepted Answer

If a consumer is spending a small portion of his or her income on a good, it means that the good is not a significant part of their budget. Therefore, changes in the price would have little impact on their purchasing decision. This suggests that the demand for the good is likely to be inelastic. Inelastic demand means that the percentage change in quantity demanded is less than the change in price.

Scenario 5.1 The Demand for Noodles Is Given by the Following Equation