A consumer buys 10 units of a good at a price of Rs.9 per unit. At price of Rs.10 per unit, he buys 9 units.
A consumer buys 10 units of a good at a price of Rs.9 per unit. At price of Rs.10 per unit, he buys 9 units. What is price elasticity of demand? Use expenditure approach. Comment on the likely shape of demand curve based on this measure of elasticity.
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| Quantity (Units) | Price (Rs.) | TE (P x Q) (Rs.) |
| 10 | 9 | 90 |
| 9 | 10 | 90 |
As per the expenditure approach, when with a change in price, the total expenditure remains unchanged, demand is unitary elastic (eD= 1). The shape of demand curve will be rectangular hyperbola.
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