Explain the relationship between price elasticity of demand for a good and fraction income spent on that good.

Question

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Answer 1

Question

Chapter 4, Problem 1RQ

To determine

Explain the relationship between price elasticity of demand for a good and fraction income spent on that good.

Expert Solution & Answer

Explanation of Solution

Budget share or fraction of income of a consumer is one of the important determinants of price elasticity of demand. For example, poor people spend their major portion of income for consumption purposes especially in food items. Therefore, a small change in the price of these items makes more proportional change in its demand, while the rich spends a smaller portion of their income for consumption purposes. As a result, they would not search for a substitute as the price of a food item changes. In this way, the price elasticity of demand and fraction of income spent on the commodity are related.

Economics Concept Introduction

Price elasticity of demand: Price elasticity of demand refers to the degree of responsiveness of quantity demanded due to a change in its price.

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Answer 2

Question

Chapter 4, Problem 1RQ

To determine

Explain the relationship between price elasticity of demand for a good and fraction income spent on that good.

Expert Solution & Answer

Explanation of Solution

Budget share or fraction of income of a consumer is one of the important determinants of price elasticity of demand. For example, poor people spend their major portion of income for consumption purposes especially in food items. Therefore, a small change in the price of these items makes more proportional change in its demand, while the rich spends a smaller portion of their income for consumption purposes. As a result, they would not search for a substitute as the price of a food item changes. In this way, the price elasticity of demand and fraction of income spent on the commodity are related.

Economics Concept Introduction

Price elasticity of demand: Price elasticity of demand refers to the degree of responsiveness of quantity demanded due to a change in its price.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 4, Problem 1RQ

To determine

Explain the relationship between price elasticity of demand for a good and fraction income spent on that good.

Expert Solution & Answer

Explanation of Solution

Budget share or fraction of income of a consumer is one of the important determinants of price elasticity of demand. For example, poor people spend their major portion of income for consumption purposes especially in food items. Therefore, a small change in the price of these items makes more proportional change in its demand, while the rich spends a smaller portion of their income for consumption purposes. As a result, they would not search for a substitute as the price of a food item changes. In this way, the price elasticity of demand and fraction of income spent on the commodity are related.

Economics Concept Introduction

Price elasticity of demand: Price elasticity of demand refers to the degree of responsiveness of quantity demanded due to a change in its price.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 4, Problem 1RQ

To determine

Explain the relationship between price elasticity of demand for a good and fraction income spent on that good.

Expert Solution & Answer

Explanation of Solution

Budget share or fraction of income of a consumer is one of the important determinants of price elasticity of demand. For example, poor people spend their major portion of income for consumption purposes especially in food items. Therefore, a small change in the price of these items makes more proportional change in its demand, while the rich spends a smaller portion of their income for consumption purposes. As a result, they would not search for a substitute as the price of a food item changes. In this way, the price elasticity of demand and fraction of income spent on the commodity are related.

Economics Concept Introduction

Price elasticity of demand: Price elasticity of demand refers to the degree of responsiveness of quantity demanded due to a change in its price.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 4, Problem 1RQ

To determine

Explain the relationship between price elasticity of demand for a good and fraction income spent on that good.

Expert Solution & Answer

Explanation of Solution

Budget share or fraction of income of a consumer is one of the important determinants of price elasticity of demand. For example, poor people spend their major portion of income for consumption purposes especially in food items. Therefore, a small change in the price of these items makes more proportional change in its demand, while the rich spends a smaller portion of their income for consumption purposes. As a result, they would not search for a substitute as the price of a food item changes. In this way, the price elasticity of demand and fraction of income spent on the commodity are related.

Economics Concept Introduction

Price elasticity of demand: Price elasticity of demand refers to the degree of responsiveness of quantity demanded due to a change in its price.

Answer 6

Chapter 4, Problem 1RQ

To determine

Explain the relationship between price elasticity of demand for a good and fraction income spent on that good.

Expert Solution & Answer

Explanation of Solution

Budget share or fraction of income of a consumer is one of the important determinants of price elasticity of demand. For example, poor people spend their major portion of income for consumption purposes especially in food items. Therefore, a small change in the price of these items makes more proportional change in its demand, while the rich spends a smaller portion of their income for consumption purposes. As a result, they would not search for a substitute as the price of a food item changes. In this way, the price elasticity of demand and fraction of income spent on the commodity are related.

Economics Concept Introduction

Price elasticity of demand: Price elasticity of demand refers to the degree of responsiveness of quantity demanded due to a change in its price.

Answer 7

Chapter 4, Problem 1RQ

To determine

Explain the relationship between price elasticity of demand for a good and fraction income spent on that good.

Answer 8

Expert Solution & Answer

Explanation of Solution

Budget share or fraction of income of a consumer is one of the important determinants of price elasticity of demand. For example, poor people spend their major portion of income for consumption purposes especially in food items. Therefore, a small change in the price of these items makes more proportional change in its demand, while the rich spends a smaller portion of their income for consumption purposes. As a result, they would not search for a substitute as the price of a food item changes. In this way, the price elasticity of demand and fraction of income spent on the commodity are related.