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 reduces the total expenditure.

Answer 1

If a rise in the price of a commodity reduces the total expenditure on that commodity, the elasticity of demand in this case would be greater than unity (i.e., the demand is elastic).

Elastic Demand (> 1): When the demand for a commodity is elastic, a percentage increase in price leads to a larger percentage decrease in the quantity demanded. As a result, total expenditure on the commodity decreases.