Question

Vernon spends the following percentages of his budget on the following goods: 23 percent on good A, 11 percent on good B, 1 percent on good C, and 3 percent on good D. For which good is price elasticity of demand the highest, ceteris paribus?a. good A.
b. good B.
c. good C.
d. good D.

Answer 1

Answer:

a. good A.

Explanation:

Data provided in the question

Spending percentage are as follows

For goods A = 23%

For goods B = 11%

For goods C = 1%

For goods D = 3%

Now the highest price elasticity of demand by ceteris paribus that means all other things would remain unchanged or constant

Since, Goods A has the highest spending percentage so it would lead to the highest price elasticity of demand