Elasticity And Expenditure

What is Elasticity and Expenditure?

The expenditure on a commodity is equivalent to the demand for the commodity times its cost. It is often significant to be aware about how the expenditure on a commodity differs as an outcome of a change in price. The cost of a commodity and the demand for the commodity are contrarily associated to each other. Whether the expenditure on the commodity increases or decreases as an outcome of an rise in its cost relies upon how receptive the demand for the commodity is to the change in the cost price. Contemplate an increase in the cost price of a commodity. If the percentage decreases in quantity is greater than the percentage rise in the cost, the expenditure on the commodity will decrease. And if the percentage decline in quantity is equivalent to the percentage rise in the cost price, the expenditure on the commodity will remain constant.

The expenditure on the commodity would change in the reverse direction as the cost price change if and only if the percentage change in quantity is greater than the percentage change in cost price. The expenditure on the commodity would remain constant if the percentage change in quantity is equal to the percentage change in cost price, i.e., if the good is unit-elastic.

This is a detailed and an elucidated information about the concept Elasticity and Expenditure. To learn more, stay tuned to BYJU’S.

Leave a Comment

Your email address will not be published. Required fields are marked *