Question

As the price of the product decreases by 7%, total expenditure on it has gone up by 3.5%. What can we say about the elasticity of demand for this product.

Solution

As per expenditure method explained above, since price and total expenditure move in opposite directions (i.e. inverse relationship), therefore e_D is more than 1 (e_D> 1).

Some More Questions From Theory Of Consumer Behaviour Chapter

Distinguish between 'Change in demand' and 'Change in quantity demanded of a commodity'.

Starting from an initial situation of consumer's equilibrium, suppose that marginal utility of a rupee increases. Will it increase or decrease the quantity demanded of the product?

What are two approaches to attain the state of consumer's equilibrium?

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Theory Of Consumer Behaviour

As the price of the product decreases by 7%, total expenditure on it has gone up by 3.5%. What can we say about the elasticity of demand for this product.

Some More Questions From Theory Of Consumer Behaviour Chapter

Distinguish between 'Change in demand' and 'Change in quantity demanded of a commodity'.

Starting from an initial situation of consumer's equilibrium, suppose that marginal utility of a rupee increases. Will it increase or decrease the quantity demanded of the product?

What are two approaches to attain the state of consumer's equilibrium?

Define indifference curve.

What is meant by marginal rate of substitution (MRS)?

Why is MRS always diminishing?

When does a consumer attain equilibrium according to indifference curve approach?

Give meaning of demand.

Name two determinants of demand.

List the factors that cause changes in demand.

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