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Questions
What will be the elasticity of demand in the following situation?
When the change in price and the total expenditure move in the opposite directions.
What is the price elasticity of demand when the change in price and total expenditure move in the opposite direction?
Short Answer
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Solution
When the change in price and the total expenditure move in opposite directions, the elasticity of demand is greater than 1.
- If price increases and total expenditure decreases, or
- If price decreases and total expenditure increases, it means that consumers are highly responsive to price changes.
Therefore, Elasticity of demand > 1 (i.e., Elastic demand).
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Notes
Students should refer to the answer according to the question.
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