Question

What will be the elasticity of demand in the following situation?

When the change in price and total expenditure move in the same direction.

What is the price elasticity of demand when the change in price and total expenditure move in the same direction

Answer 1

When the change in price and the total expenditure move in the same direction, the elasticity of demand is less than 1.

1. If price increases and total expenditure also increases, or
2. If price decreases and total expenditure also decreases, it means that consumers are not very responsive to price changes.

Therefore, Elasticity of demand < 1 (i.e., Inelastic demand).