Question

Would the elasticity of demand in the following case be unity, less than unity or greater than unity?

A fall in the price of a commodity increases total expenditure.

Answer 1

If a fall in the price of a commodity increases total expenditure on that commodity, the elasticity of demand in this case would be greater than unity (i.e., the market is elastic).

Elastic Demand (> 1): When the demand for a commodity is elastic, a percentage decrease in price leads to a larger percentage increase in the quantity demanded. As a result, total expenditure on the commodity increases.