Purchase Solution

Price elasticity of demand and expenditure

Not what you're looking for?

Ask Custom Question

Suppose the own-price elasticity of demand for good X is -0.5, and that the price of good X increases by 10%. What would you expect to happen to the total expenditures on good X?
A. increase.

B. decrease.

C. unchanged.

D. none of the above.

Purchase this Solution
Solution Summary

This discusses the impact of Price elasticity of demand on expenditure.

Solution Preview

Suppose the own-price elasticity of demand for good X is -0.5, and that the price of good X increases by 10%. What would you expect to happen to the total expenditures on good X?

More generally, whenever elasticity is less than one, ...

Purchase this Solution
Free BrainMass Quizzes
Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

View More Free Quizzes
Related BrainMass Solutions

  • Predicting Changes in Demand

    226084 Predicting Changes in Demand Question: Suppose that the price elasticity of demand for good X is -2, its income elasticity is 3, its advertising elasticity is 4, and the cross price elasticity of demand between it and good Y is -6.

  • Ice cream and utility maximization

    When the price of Lipton herbal teas rises 10 percent, the demand for Celestial Seasons herbal teas rises 12 percent. What is the cross-price elasticity of demand for CS teas? d.

  • Analyzing the given demand function

    Absolute value of own price elasticity of demand=1.19 Absolute value of Income elasticity of demand=0.33 Absolute value of cross price elasticity of demand=0.66 Absolute value of own price elasticity is highest.

  • Interpreting Regression and Elasticity Coefficients

    Absolute value of own price elasticity of demand=0.79936 Absolute value of cross price elasticity of demand= 0.479616 Absolute value of Advertizing elasticity of demand= 0.459632 Absolute value of Income elasticity of demand= 0.039968 We find that

  • Break-Even Analysis, real GDP, and price elasticity

    b) Estimate the price elasticity of demand at the price of $300. Use $325 to determine the change in price. c) Would you characterize computers as price elastic or price inelastic, based on the above information? 1a.

  • Justifying An Increased Line of Credit

    The absolute value of elasticity is more than 1, thus the demand is in elastic range at this point. A decrease in the price will increase the demand and total revenues.

  • Multiplicative Exponential Demand Function

    Determine the advertising elasticity of demand. b. Determine the point price elasticity of demand. c. What interpretation would you give to the exponent N?

  • Advertising Expenditure

    Advertising expenditure is a form of non-price competition that can increase sales while price remains constant. The aim of advertising is to shift the demand curve rightward and make it less elastic.

  • Applying elasticity concepts

    Based on the cross-price elasticity of demand estimated above, goods X and Y are substitutes. True False Question 9 1.

View More Related Solutions