If an increase in price causes total expenditure on a product to decrease, then the price elasticity of demand is:
A)inelastic.
B)elastic.
C)unit elastic.
D)zero.

Question

If an increase in price causes total expenditure on a product to decrease, then the price elasticity of demand is:
A)​inelastic.
B)​elastic.
C)​unit elastic.
D)​zero.

Quizplus · Accepted Answer

When an increase in price causes a decrease in the total expenditure on a product, it means that the demand is responsive to the change in price, i.e. when the price increases, people demand less. This reflects an elastic demand, where a small change in price causes a bigger change in demand.

If an Increase in Price Causes Total Expenditure on a Product