Answer to Question #312199 in Economics of Enterprise for Keke

Question

In elastic range of demand price and total expenditure on the good are

Answer 1

In theory, the price elasticity can range from (negative) infinity to zero. The nearer to infinity the more elastic demand is, and the nearer to zero the more inelastic demand is. As for practice, elasticities appear to be concentrated in the negative 10-to-zero region. When demand is elastic, a decrease in a commodity's price translates in an increase in total expenditure on it. On the contrary, as prices rise, total expenditure falls. It means that when demand is highly elastic, price and total expenditure move in different directions. A good's demand might be inelastic at low prices yet elastic at high prices. When the price of a product rises, individuals purchase less of it, leading to a decrease in total expenditures.