In Table, the price elasticity of demand for Kellogg’s Corn Flakes includes a wide range of estimates. It turns out one end of the range is observed for low income households, while the other is observed for high-income households. Identify which end of the range most likely corresponds to which type of household, and explain briefly.
Rent paid out ........... Opportunity cost of:
Interest on loans ......... Owner’s land and buildings (rent foregone)
Managers’ salaries ........ Owner’s money (investment income
Hourly workers’ wages ....... Foregone)
Cost of raw materials ........ Owner’s time (labor income foregone)