Question

Price of good falls from 8 rupees to 5 rupees 1 kg and total Expenditure on it increases from 2400 to 2500 . find out elasticity through total expenditure method.

11th grade commerce
economics ​

Answer 1

To find out the elasticity through the total expenditure method, we can use the following formula:

Elasticity = (Percentage change in quantity demanded) / (Percentage change in price)

We are given that the price of the good falls from 8 rupees to 5 rupees per kg, which is a decrease of (8-5)/8 = 0.375 or 37.5%.

We are also given that the total expenditure on the good increases from 2400 to 2500, which is an increase of (2500-2400)/2400 = 0.0417 or 4.17%.

Now, we can use the total expenditure method to find out the elasticity:

If the total expenditure on a good remains constant despite a change in price, the demand is said to be unitary elastic.

If the total expenditure on a good increases with a decrease in price, the demand is said to be elastic.

If the total expenditure on a good decreases with a decrease in price, the demand is said to be inelastic.

In this case, we see that the total expenditure increases when the price decreases. This suggests that the demand is elastic.

Using the formula for elasticity, we can calculate:

Elasticity = (Percentage change in quantity demanded) / (Percentage change in price)

Elasticity = (4.17%) / (-37.5%)

Elasticity = -0.111

Therefore, the elasticity of demand for the good is -0.111. Since the elasticity is negative, we can conclude that the good is a normal good, i.e., as the price of the good falls, the quantity demanded increases.

Answer 2

Step-by-step explTo find out the price elasticity of demand using the total expenditure method, we need to use the formula:

Elasticity = (Percentage change in quantity demanded) / (Percentage change in price)

First, let's calculate the percentage change in price:

Percentage change in price = ((New Price - Old Price) / Old Price) * 100

= ((5 - 8) / 8) * 100

= (-3/8) * 100

= -37.5%

Now, let's calculate the percentage change in quantity demanded:

Percentage change in quantity demanded = ((New Total Expenditure - Old Total Expenditure) / Old Total Expenditure) * 100

= ((2500 - 2400) / 2400) * 100

= (100/2400) * 100

= 4.17%

Now, let's calculate the price elasticity of demand:

Elasticity = (Percentage change in quantity demanded) / (Percentage change in price)

= (4.17%)/(-37.5%)

= -0.1112

Therefore, the price elasticity of demand through the total expenditure method is -0.1112.anation: