If a consumer purchases only two goods (X and Y )and the demand for X is elastic,then a rise in the price of X
A)will cause total spending on good Y to rise.
B)will cause total spending on good Y to fall.
C)will cause total spending on good Y to remain unchanged.
D)will have an indeterminate effect on total spending on good Y.

Question

Quizplus · Accepted Answer

When the demand for X is elastic, a rise in the price of X will cause consumers to purchase less of X. This will free up some of their budget, which they may then use to purchase more of good Y. Therefore, total spending on good Y will rise.

If a Consumer Purchases Only Two Goods (X and Y