Vernon spends the following percentages of his budget on the following goods: 13 percent on good A, 21 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?

Question

Addyson Hughes

Business

19 August, 03:43

Vernon spends the following percentages of his budget on the following goods: 13 percent on good A, 21 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?

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Answers (1)

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Francesca Jenkins · Answer 1

Answer: 21 percent on good B.

Explanation:

Price elasticity of demand is a type of elasticity of demand which shows the effect of change in the quantity of goods demanded as a result of its price change. It is mathematically expressed as the percentage change in quantity demanded divided by the percentage change in price.

From the question, we are told that Vernon spent his budget as 13 percent on good A, 21 percent on good B, 1 percent on good C, and 3 percent on good D.

Vernon spent 21 percent of his budget on good B, this shows where the price elasticity of demand is highest as price change led to the highest change in quantity demanded out of the options given.