Relationship Between Price Elasticity Of Demand And Total Expenditure On A Product
Economics notes
Relationship Between Price Elasticity Of Demand And Total Expenditure On A Product
➡️ Price elasticity of demand (PED) measures the responsiveness of demand for a product to a change in its price.
➡️ If PED is elastic, a small change in price will lead to a large change in total expenditure on the product.
➡️ If PED is inelastic, a small change in price will lead to a small change in total expenditure on the product.
➡️ If PED is unitary elastic, a small change in price will lead to an equal change in total expenditure on the product.
➡️ If PED is perfectly elastic, a small change in price will lead to an infinite change in total expenditure on the product.
How does price elasticity of demand affect total expenditure on a product?
Price elasticity of demand measures the responsiveness of demand for a product to changes in its price. If the price elasticity of demand is inelastic, then a change in price will have a small effect on the total expenditure on the product. Conversely, if the price elasticity of demand is elastic, then a change in price will have a large effect on the total expenditure on the product.
What is the difference between price elasticity of demand and total expenditure on a product?
Price elasticity of demand measures the responsiveness of demand for a product to changes in its price, while total expenditure on a product is the total amount of money spent on the product.
How can changes in price elasticity of demand affect total expenditure on a product?
Changes in price elasticity of demand can have a significant effect on total expenditure on a product. If the price elasticity of demand is inelastic, then a change in price will have a small effect on the total expenditure on the product. Conversely, if the price elasticity of demand is elastic, then a change in price will have a large effect on the total expenditure on the product.