Question

Would the elasticity of demand in the following case be unity, less than unity or greater than unity?

A rise in the price of a commodity increases total expenditure.

Answer 1

If a rise in the price of a commodity increases total expenditure on that commodity, the elasticity of demand would be less than unity (i.e., the demand is inelastic).

Inelastic Demand (< 1): When the demand for a commodity is inelastic, a percentage increase in price leads to a smaller decrease in the quantity demanded. As a result, total expenditure on the commodity increases.