A 10 percent increase in the price of butter reduces butter consumption by about 5 percent. The increase causes households to

A) spend more on butter.
B) spend less on butter.
C) spend the same amount on butter.
D) consume more goods like bread that are complements of butter.

Question

Stephanie Marie · Accepted Answer

Final Answer : A, Explanation :  The price elasticity of demand for butter is inelastic (less than 1), so the percentage decrease in quantity demanded is less than the percentage increase in price, leading to an increase in total expenditure on butter.

A 10 percent increase in the price of butter reduces butter consumption by about 5 percent. The increase causes households to

A) spend more on butter.
B) spend less on butter.
C) spend the same amount on butter.
D) consume more goods like bread that are complements of butter.

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Learning Objectives

Learning Objectives

Related questions

A 10 percent increase in the price of butter reduces butter consumption by about 5 percent. The increase causes households toA) spend more on butter.B) spend less on butter.C) spend the same amount on butter.D) consume more goods like bread that are complements of butter.

Definitions

Learning Objectives

Learning Objectives

Related questions

A 10 percent increase in the price of butter reduces butter consumption by about 5 percent. The increase causes households to

A) spend more on butter.
B) spend less on butter.
C) spend the same amount on butter.
D) consume more goods like bread that are complements of butter.