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Elasticity And Expenditure

What is Elasticity and Expenditure?

The expenditure on a commodity is equivalent to the demand for the commodity times its price. It is often significant to be aware of how the expenditure on a commodity differs as an outcome of a change in price. The price of a commodity and the demand for the commodity is contrarily associated to each other.

Whether the expenditure on the commodity increases or decreases as an outcome of an rise in its price relies upon how receptive the demand for the commodity is to the change in the price.

Contemplate an increase in the price of a commodity. If the percentage decrease in quantity is greater than the percentage rise in the price, the expenditure on the commodity will decrease. And if the percentage decline in quantity is equivalent to the percentage rise in the price, the expenditure on the commodity will remain constant.

The expenditure on the commodity would change in the reverse direction as the price change if and only if the percentage change in quantity is greater than the percentage change in price. The expenditure on the commodity will remain constant if the percentage change in quantity is equal to the percentage change in price, i.e., if the good is unit-elastic.

This concludes the article on the topic about the concept of Elasticity and Expenditure, which is an important topic for Commerce students. For more such interesting articles, stay tuned to CoolGyan’S.