Price elasticity of demand and expenditure
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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.
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Solution Summary
This discusses the impact of Price elasticity of demand on expenditure.
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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, ...
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