Question

1. When demand curve is elastic, a. price and total expenditure move in the same direction. b. price and total expenditure move in the opposite direction. c. price may be rising or falling but total expenditure is constant. d. price may be rising or falling but total expenditure depends on supply.

Answer 1

The correct answer is option b.

Step-by-step explanation:

When the demand curve is elastic, this means that a change in price causes a greater change in quantity demanded of the commodity.

We know that price and quantity demanded are inversely related. When the price of a commodity increases its quantity demanded will decrease by a greater proportion.

This will cause the total expenditure to decrease, this shows that when demand is elastic price and total expenditure move in the opposite direction.