as the price of a product decrease by 7% the total expenditure on it has gone up bu 3.5%. what can we say about the elasticity of demand for this product?

Question

Answer

Analysis of Elasticity of Demand for a Product

Scenario

In this scenario, the price of a product has decreased by 7%, but the total expenditure on it has gone up by 3.5%. We need to analyze the elasticity of demand for this product based on this information.

Calculation of Price Elasticity of Demand

The price elasticity of demand measures the responsiveness of the quantity demanded of a product to a change in its price. It is calculated as:

Price Elasticity of Demand = (% Change in Quantity Demanded) ÷ (% Change in Price)

Here, we know that the price of the product has decreased by 7%, which means:

% Change in Price = -7%

However, we do not have any information about the % change in quantity demanded. Therefore, we cannot accurately calculate the price elasticity of demand for this product.

Interpretation of Results

Since we do not have the price elasticity of demand, we cannot make any definitive conclusions about the elasticity of demand for this product. However, we can make some general observations based on the given information:

The fact that the total expenditure on the product has gone up by 3.5% implies that the demand for this product is relatively inelastic.

If the demand for the product were elastic, we would expect the decrease in price to result in a larger increase in quantity demanded, leading to a decrease in total expenditure.

However, since the total expenditure has gone up, it suggests that the decrease in price has not led to a significant increase in quantity demanded.

This could be due to a number of factors, such as low consumer awareness, brand loyalty, or a lack of close substitutes for the product.

Conclusion

In conclusion, we cannot accurately determine the elasticity of demand for this product based on the given information. However, the fact that the total expenditure has gone up while the price has decreased suggests that the demand for the product is relatively inelastic.

Answer

elasticity of demand is greater than one as both price and total expenditure move in opposite direction i.e. as price falls by 7% total expenditure increases by 3.5%. so there is negative relation between both total expenditure and price soo elasicity of demand is greater then one

Answer

elasticity of demand will be greater than one .bcz in response to fall in price   total expenditure is ibcreasing  so  .there is negative relation between both

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