Suppose the own-price elasticity of demand for good X is -0.5, and that the price of good X increases by 10%.What would you expect to happen to the total expenditures on good X?
A)increase.
B)decrease.
C)unchanged.
D)neither increase, decrease nor remain unchanged.

Question

Quizplus · Accepted Answer

When the own-price elasticity of demand is inelastic (between -1 and 0), as in this case (-0.5), an increase in price leads to an increase in total expenditures. This is because the percentage decrease in quantity demanded is less than the percentage increase in price.

Suppose the Own-Price Elasticity of Demand for Good X Is