Price Elasticity Determines Expenditure Changes

Steps:

• Price elasticity of demand (PED) measures responsiveness of quantity demanded to price changes; |PED| > 1 is elastic, |PED| < 1 is inelastic.
• For elastic demand, a price rise causes quantity to fall more than proportionally, reducing total expenditure.
• Table indicates Lee's PED > 1 for both meals and tickets, so Lee's spending falls on both.
• Kim's PED varies (elastic for one, inelastic for other), so Kim's spending change is indeterminate for both.

Why C is correct:

• Lee's elastic demand for both products means total expenditure decreases when price rises, per the PED formula: %ΔQ > %ΔP in magnitude.

Why the others are wrong:

• A: Lee's elastic demand causes spending to decrease, not increase.
• B: Kim's mixed elasticities mean spending may rise on one and fall on the other, not definitely more on both.
• D: Cinema revenue depends on both consumers' demands; Lee's fall is offset by Kim's potential inelastic response, so not definite.

Final answer: C