Suppose the price of a good rises. In general, how does the percentage of your budget you spend on that good affect the elasticity of your demand for goods overall?

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Social Studies

Stinky

4 June, 04:15

Suppose the price of a good rises. In general, how does the percentage of your budget you spend on that good affect the elasticity of your demand for goods overall?

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Danielle Ramsey · Answer 1

Answer: The higher the percentage of your budget spent on a particular good, the more elastic your demand for goods overall

Explanation: The elasticity of demand is an economic principle which measures the rate or degree of consumer response to changes in quantity demanded as a result of a change in price, given that all other factors remain equal. This means that all things being equal, the desire for a good reduces as the price increases.

For some products, the desire to buy them drops rapidly with even a slight change in price while quantity demanded for some other products (especially those deemed essential by the consumer) remain constant or just a slight difference even with rapid increase in price.