Total expenditures on a company's product will be largest when the elasticity of demand
A) Equals -1
B) Is greater than -1
C) Is less than -1
D) Equals 0

Question

Quizplus · Accepted Answer

When the elasticity of demand equals -1, it means the product is unit elastic, and any percentage change in price leads to an equal percentage change in quantity demanded, maximizing total revenue (and thus expenditures on the product).

Total Expenditures on a Company's Product Will Be Largest When