Suppose the own-price elasticity of demand for good X is -0.25, and that the quantity of good X increases by 5%.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

A negative own-price elasticity of -0.25 implies that the demand for good X is relatively inelastic. When the price of good X decreases, the quantity demanded only increases slightly. Therefore, a 5% increase in quantity demanded implies that the price has decreased. With inelastic demand, a decrease in price will lead to a proportionately smaller increase in quantity demanded, resulting in a decrease in total expenditures on good X.

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