When product price increases, expenditure on the commodity will not increase in the situation when Ed>1 (elasticity of demand is greater than unity). It will increase only in situation when Ed<1. In a situation when Ed=1. Expenditure will remain constant, even when prices rise.
“If a product price increases, a family’s spending on the product has to increase.” Defend or refute.
Answers
Krishna Manivanan
When product price increases, expenditure on the commodity will not increase in the situation when Ed>1 (elasticity of demand is greater than unity). It will increase only in situation when Ed<1. In a situation when Ed=1. Expenditure will remain constant, even when prices rise.