devarshi-dt-logo

Question:

Demand for a good is termed inelastic through the expenditure approach when if (Choose the correct alternative):Price of the good falls; expenditure on it risesPrice of the good falls; expenditure on it fallsPrice of the good falls; expenditure on it remains unchangedPrice of the good rises, expenditure on it falls

Price of the good falls; expenditure on it remains unchanged

Price of the good rises, expenditure on it falls

Price of the good falls; expenditure on it falls

Price of the good falls; expenditure on it rises

Solution:

The correct option is B. Price of the good falls; expenditure on it remains unchanged.
Demand for a good is termed inelastic through the expenditure approach when the price of the good falls, and expenditure on it remains unchanged. In other words, a fall in price leads to only a small increase in quantity demanded, resulting in overall expenditure remaining relatively constant.