Question

With the help of a diagram, explain the condition when E_P > 1.

Answer 1

Ep > 1: Elastic Demand

If the price of the commodity falls, total expenditure increases, and with a rise in its price, total expenditure decreases, then demand for that commodity will be elastic or greater than one. In other words, when there is an inverse relationship between the price and total expenditure, the price elasticity of demand will be greater than one.

Diagram: The demand curve is relatively flatter, indicating that a small change in price leads to a larger change in quantity demanded.