A good's price falls from ₹50 to ₹40 and the quantity demanded rises from 100 to 125. By the total expenditure method, demand is

elastic: spending risesCorrect answerYour answerinelastic: spending fallsCorrect answerYour answerunitary elastic: spending stays at ₹5,000Correct answerYour answerperfectly elastic: quantity risesCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

Before: 50 × 100 = ₹5,000. After: 40 × 125 = ₹5,000.
Unchanged spending: unitary elastic.

Worth noting

The percentage method from the starting point gives 25% ÷ 20% = 1.25; the two methods can differ over a large change, and the question asks for the total expenditure method.

Concept: Unitary elasticity from spending
Typical timeTypical: 100 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.

A good's price falls from ₹50 to ₹40 and the quantity demanded rises from 100 to 125. By the total expenditure method, demand is

Explanation