📚 Learning Guide
Consumer Spending and Price Elasticity
easy

How does an increase in the price of a non-essential good typically affect consumer spending on that good?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

Consumer spending increases

B

Consumer spending decreases

C

Consumer spending remains the same

D

Consumer spending fluctuates unpredictably

Understanding the Answer

Let's break down why this is correct

Answer

When the price of a non-essential good, like a luxury item or a fancy restaurant meal, goes up, people usually buy less of it. This happens because non-essential goods are often considered optional, so if the price rises, consumers may decide to save their money for other things instead. For example, if a new smartphone model becomes much more expensive, some people might choose to keep their current phone or look for a cheaper alternative. This behavior shows that consumers are sensitive to price changes for non-essential items, which means the demand for these goods is elastic. In general, when prices rise, spending on these non-essentials tends to decrease as people adjust their budgets.

Detailed Explanation

When prices go up for things we don't need, people usually buy less. Other options are incorrect because Some might think higher prices mean people spend more; It's a common belief that spending stays the same.

Key Concepts

consumer spending
Topic

Consumer Spending and Price Elasticity

Difficulty

easy level question

Cognitive Level

understand

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