Suppose the own-price elasticity of demand for good X is -5, and that the quantity of good X decreases 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

The own-price elasticity of demand is negative, which means that an increase in price will lead to a decrease in quantity demanded. In this case, the percentage change in quantity demanded (-5%) is smaller than the percentage change in price (unknown). Therefore, we can expect that the price has increased, leading to a decrease in total expenditures on good X. This is because the decrease in quantity demanded is not large enough to offset the increase in price.

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