A consumer buys 8 units of a good at a price Rs.7 per unit. When price rises to Rs.8 per unit, he buys 7 units.
A consumer buys 8 units of a good at a price Rs.7 per unit. When price rises to Rs.8 per unit, he buys 7 units. Calculate price elasticity of demand through expenditure method. Comment on the shape of demand curve based on this information.
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| Quantity (Units) | Price (Rs.) | TE (Rs.) |
| 8 | 7 | 56 |
| 7 | 8 | 56 |
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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