The less important the good is in everyday consumption and the less the percentage of a budget that is spent on the good:
A) the greater will be the price elasticity of the good.
B) the greater will be the effect of the price increase on the decrease in the demand.
C) the smaller will be the price elasticity of the good.
D) the smaller will be the effect of the price increase on the increase in the demand.

Question

Quizplus · Accepted Answer

When a good is less important in everyday consumption and represents a small percentage of a budget, the consumer is less likely to change their purchasing habits even if the price of the good increases. This means that the price elasticity of the good will be smaller, as the change in price will have less of an effect on the quantity demanded. Therefore, choice C is correct.

The Less Important the Good Is in Everyday Consumption and the Less