George spends more than half of his monthly income on rent.
Based only on this information, George's demand for rental housing would be expected to be
A.
relatively inelastic
.
B.
relatively elastic
.
C.
unitary
.
D.
There is not enough information to determine anything about elasticity.
A. relatively inelastic
To determine the expected elasticity of George's demand for rental housing based on the information given, we need to understand the concept of elasticity and how it relates to income and the proportion spent on rent.
The elasticity of demand measures the responsiveness of quantity demanded to a change in price. It helps us determine how sensitive the demand for a good or service is to changes in price. There are three categories of elasticity: inelastic, elastic, and unitary.
If George spends more than half of his monthly income on rent, this suggests that his budget for other expenses, such as food, clothing, and leisure activities, is relatively limited. In this situation, even if the price of rental housing were to increase, George might still need to continue renting due to the lack of affordable alternatives.
Therefore, based on this information alone, George's demand for rental housing would be expected to be relatively inelastic. A relatively inelastic demand means that the quantity demanded of a good or service is not very responsive to changes in price.
Therefore, the correct answer is A. relatively inelastic.