Carter has budgeted $40 per month for candy bars.No matter how the price of candy bars changes, he spends exactly $40 per month.Carter's price elasticity of demand for candy bars must
A) Equal zero.
B) Be unitary.
C) Be very inelastic since the amount he spends is not responsive to a price change.
D) Be very elastic since the quantity he demands will change significantly if the price changes.

Question

Quizplus · Accepted Answer

Carter's behavior indicates a unitary price elasticity of demand, as his total expenditure on candy bars remains constant regardless of price changes. This means the percentage change in quantity demanded equals the percentage change in price.

Carter Has Budgeted $40 Per Month for Candy Bars