When the consumer spends a small portion of his income on a good, demand will be
A) elastic.
B) unit-elastic.
C) inelastic.
D) elastic, unit-elastic or inelastic depending upon supply.

Question

Quizplus · Accepted Answer

When a consumer spends a small portion of his income on a good, the demand for the good tends to be inelastic. This is because even if there is a price increase, the total amount spent on the good will still only be a small portion of the consumer's income, and so they will not be greatly affected by the change in price.

When the Consumer Spends a Small Portion of His Income