What is the relationship between price elasticity of demand of a commodity and total expenditure on it? Explain.
What is the relationship between price elasticity of demand of a commodity and total expenditure on it? Explain.
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(i) When price of a good falls and total expenditure on the good rises, the demand for that good is said to be elastic. (i.e.,Ep > l)
(ii) When price of a good falls and total expenditure on the good remain the same, the demand for that good is said to be unitary elastic. (i e.,Ep = 1)
(iii) When price of a good falls and total expenditure on the good also falls, the demand for that good is said to be inelastic. (i.e., Ep < l).
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