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AP® Microeconomics

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Moderate

Elasticity of Demand: Effect on Expenditures

APMICR-VXS8JG

If a product A makes up a significant percentage of most families' budgets, and product B is a luxury good, what would most likely happen to total expenditures on each product if the prices increase?

A

Expenditures on product A would increase, and expenditures on product B would decrease.

B

Expenditures on product A would decrease, and expenditures on product B would increase.

C

Expenditures on both products would increase.

D

Expenditures on both products would decrease.

E

Expenditures on two products would not change.