Question

If the expenditure on a good changes in the opposite direction of change in its price, the price elasticity of demand will be ______.

Options

• less than 1

• greater than 1

• expand to 1

• equal to 0

Answer 1

If the expenditure on a good changes in the opposite direction of change in its price, the price elasticity of demand will be greater than 1.

Explanation:

When total expenditure changes in the opposite direction to price, demand is elastic. Hence, price elasticity of demand is greater than one.