Question

Compare the demand for pencilspencils with demand for gasolinegasoline. The demand for pencilspencils is likely A. more elastic because pencils tendpencils tend to be purchased in larger quantities. B. more inelastic because pencils tendpencils tend to be purchased more frequently. C. more elastic because pencils tendpencils tend to represent a smaller fraction of a​ consumer's budget. D. more elastic because pencils tendpencils tend to represent a larger fraction of a​ consumer's budget. E. more inelastic because pencils tendpencils tend to represent a smaller fraction of a​ consumer's budget.

Answer 1

Answer: Option E

Step-by-step explanation: Elasticity refers to the tendency of a good or service of changing its demand with respect to change in its price. Higher elasticity means higher change and vice versa. The elasticity is dependent on a number of factors including the proportion of income that the consumer uses for a commodity.

A rational consumer will not take into consideration change in price if the portion of his income he spends on such commodity is low.

Hence from the above we can conclude that the correct option is E.