A consumer buys 50 units of a commodity priced at ₹20 per unit. When the price increases by ₹5 per unit, the consumer spends the total of ` ₹1,000 on the commodity. What is the price elasticity of demand by the total expenditure method?

[1 mark]

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Less than 1

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Greater than 1

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Solution

The correct option is C 1
Expenditure in case 1 = 50 × 20 = ₹1000
Given, expenditure in case 2 = ₹1,000
The total expenditure on the commodity remains unchanged due to the change in price. So, the elasticity is unity.

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A consumer buys 50 units of a commodity priced at ₹20 per unit. When the price increases by ₹5 per unit, the consumer spends the total of ` ₹1,000 on the commodity. What is the price elasticity of demand by the total expenditure method? [1 mark]

The correct option is C 1Expenditure in case 1 = 50 × 20 = ₹1000 Given, expenditure in case 2 = ₹1,000 The total expenditure on the commodity remains unchanged due to the change in price. So, the elasticity is unity.

A consumer buys 50 units of a commodity priced at ₹20 per unit. When the price increases by ₹5 per unit, the consumer spends the total of ` ₹1,000 on the commodity. What is the price elasticity of demand by the total expenditure method?

[1 mark]

The correct option is C 1
Expenditure in case 1 = 50 × 20 = ₹1000
Given, expenditure in case 2 = ₹1,000
The total expenditure on the commodity remains unchanged due to the change in price. So, the elasticity is unity.