Question

Demand for a good is elastic, if _________________.

• A. a fall in price leads to a decrease in total expenditure on that good
• B. demand for that good increases when price falls
• C. a price fall produces a less than proportionate rise in the quantity demanded
• D. as a result of rise in price total expenditure of the goods decreases

Answer 1

The correct option is D as a result of rise in price total expenditure of the goods decreases

Under total outlay method of measuring elasticity of demand, the demand for a good is elastic when a rise in price leads to a fall in total expenditure. Others are examples of inelastic demand.