Question

The demand of a commodity when measured through the expenditure approach is inelastic, result in (choose the correct alternative) :

(a) no change in expenditure on it

(b) increase in expenditure on it.

(c) decrease in expenditure on it

(d) any one of the above

Answer 1

The demand of a commodity, when measured through the expenditure approach, is inelastic. A fall in its price will result in decrease in expenditure on it.

Reason : In case of inelastic demand total expenditure shares a positive relationship with price. Therefore, a fall in price leads to a corresponding decline in expenditure.

Hence, the correct answer is option (c).