The price of salt rises from ₹20 to ₹25 a kg and a household's purchase falls from 5 kg to 4.8 kg a month. By the total expenditure method, its demand for salt is

inelastic, because spending rises from ₹100 to ₹120Correct answerYour answerelastic, because spending rises from ₹100 to ₹120Correct answerYour answerunitary elastic, because the quantity hardly changesCorrect answerYour answerelastic, because the price roseCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Spending before = 20 × 5 = ₹100; after = 25 × 4.8 = ₹120.
Price and spending move in the same direction, so demand is inelastic.

Concept: Total expenditure test with a price rise
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsThe total expenditure method

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Ten questions from Price Elasticity of Demand, at your own pace.

The price of salt rises from ₹20 to ₹25 a kg and a household's purchase falls from 5 kg to 4.8 kg a month. By the total expenditure method, its demand for salt is

Explanation