Question

True or False with Reason:

According to total outlay method, expenditure decreases with rise in price of the given commodity in case of elastic demand.

Answer 1

This statement is true.

Explanation:

• In case of elastic demand, price and total expenditure move in opposite directions.
• When price rises, quantity demanded falls proportionately more, so total expenditure decreases.
• Hence, expenditure decreases with a rise in price when demand is elastic.