Question

95. Under Total Outlay Method, if as a result of the
decrease in price of a product, the total
expenditure on the product rises, we say that Price
Elasticity of Demand is-
(a) Equal to unity
(b) Greater than unity
(c) Less than unity
(d) Zero​

Answer 1

Based on Total Outlay Method,if the total expenditure on any product increases with a decrease in its price,the price elasticity of demand is greater than unity.Hence,the correct answer is option b) or Greater than unity.

Explanation:

Generally under Total Outlay Method,as the total expenditure on any particular product or service increases with a decrease in its price and vise versa,the price elasticity of demand of that product/service is greater than unity or 1.Note that in this case,the price and the expenditure level of the product or service are inversely related or move in the reverse direction.