If an individual's demand is elastic and price increases, what happens to total utility (TU), marginal utility (MU), consumer surplus (CS), and total expenditure (TE)?
A)TU increases, MU decreases, CS decreases, and TE decreases
B)TU increases, MU increases, CS increases, and TE decreases
C)TU decreases, MU increases, CS decreases, and TE increases
D)TU decreases, MU decreases, CS decreases, and TE decreases
E)TU decreases, MU increases, CS decreases, and TE decreases

Question

Quizplus · Accepted Answer

If an individual's demand is elastic, a price increase will lead to a decrease in the quantity demanded, causing the individual to have less total utility (TU) because they are consuming less of the good. As a result, marginal utility (MU) will increase because each unit of the good consumed has become more valuable to the individual. This increase in MU will eventually level out, and the individual will reach their optimal consumption level at a price lower than the new price. Consumer surplus (CS) will decrease because the individual is now paying a higher price for the same level of satisfaction. Total expenditure (TE) will decrease because the individual is consuming less of the good at a higher price.

If an Individual's Demand Is Elastic and Price Increases, What