📚 Learning Guide
Consumer Spending and Price Elasticity
easy

If the price of a necessity like bread increases and demand is inelastic, what happens to total consumer spending on bread?

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Learning Path
Learning Path

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Choose the Best Answer

A

It decreases

B

It increases

C

It stays the same

D

It fluctuates wildly

Understanding the Answer

Let's break down why this is correct

Answer

When the price of a necessity like bread increases and the demand for it is inelastic, total consumer spending on bread actually goes up. Inelastic demand means that people will continue to buy almost the same amount of bread even if the price rises because they need it for their daily lives. For example, if a loaf of bread costs $2 and someone buys five loaves, their total spending is $10. If the price rises to $3 and they still buy five loaves, their total spending increases to $15. This shows that even though the price went up, people are spending more overall because they still need to buy the same amount of bread.

Detailed Explanation

When the price goes up and demand is inelastic, people still buy bread. Other options are incorrect because Some might think that spending goes down when prices rise; It's a common mistake to think spending stays the same.

Key Concepts

Price Elasticity of Demand
Consumer Spending
Market Behavior
Topic

Consumer Spending and Price Elasticity

Difficulty

easy level question

Cognitive Level

understand

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