Question

In the table below, identify the type of elasticity and state the reasons for the same:

Price Movement	Total Expenditure	Elasticity
a Falls	Rises	?
b Rises	Rises	?

Answer 1

a) If a fall in own price of the commodity causes a rise in total expenditure, then elasticity of demand is greater than unitary. This is an example for normal goods.

b) If an increase in own price of the commodity causes a rise in total expenditure, then elasticity of demand is less than unitary. This is an example for Articles of distinction.