If the total expenditure on cars increases when the price of cars rises,the price elasticity of demand for cars is
A)exactly zero.
B)not determinable from the information given.
C)greater than one (demand is elastic).
D)equal to one (demand is unit elastic).
E)less than one (demand is inelastic).

Question

Quizplus · Accepted Answer

When the total expenditure on a product increases with a rise in its price, it indicates that the demand is inelastic. If demand were elastic, consumers would reduce their demand significantly with a small increase in price, which would lead to a decrease in total expenditure. Therefore, the price elasticity of demand for cars is less than one.

If the Total Expenditure on Cars Increases When the Price