The citizens of Lilliput spend a higher fraction of their income on food than do the citizens of Brobdingnag. The reason could be that a. Lilliput has lower food prices, and the pr... The citizens of Lilliput spend a higher fraction of their income on food than do the citizens of Brobdingnag. The reason could be that a. Lilliput has lower food prices, and the price elasticity of demand is zero. b. Lilliput has lower food prices, and the price elasticity of demand is 0.5. c. Lilliput has lower income, and the income elasticity of demand is 0.5. d. Lilliput has lower income, and the income elasticity of demand is 1.5. Read more

Understand the Problem

The question is asking us to analyze the consumption patterns of citizens in two fictional places, Lilliput and Brobdingnag, in relation to their food expenditure. We need to determine the reason for the higher fraction of income spent on food by the citizens of Lilliput based on the provided options regarding food prices and income elasticities.

More Information

The citizens of Lilliput are spending a higher fraction of their income on food because their overall income is lower, leading them to allocate a larger percentage of their income to necessary expenditures like food. Additionally, an income elasticity of demand of 1.5 indicates that proportionately more income is being devoted to consuming food as income changes.

Tips

A common mistake might be to confuse price elasticity with income elasticity in this context. Price elasticity would relate to changes in quantity demanded from changes in price, whereas income elasticity relates to changes in spending associated with income changes.

Sources

• 5-1 QuickQuiz A good tends to have... - Course Hero - coursehero.com