Suppose the price elasticity of demand for a good is – 0.2. How will the expenditure on the good be affected
Suppose the price elasticity of demand for a good is – 0.2. How will the expenditure on the good be affected if there is a 10 % increase in the price of the good?
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Since Ep is 0.2, that is less than one or inelastic demand, then an increase in price of good will result an increase in the expenditure. Because in case of inelastic demand, price and expenditure are positively related.
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