Question

If the price elasticity of demand for a commodity is less than unity, a decrease in price would result in ______.

Options

• Proportionately less increase in the quantity demanded

• Proportionately more increase in the quantity demanded

• Increase in total expenditure on the product

• None of these

Answer 1

If the price elasticity of demand for a commodity is less than unity, a decrease in price would result in Proportionately less increase in the quantity demanded.

Explanation:

With elasticity below one, quantity demanded changes proportionately less than price. A price decrease therefore causes a proportionately smaller rise in quantity, and total expenditure falls.