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If the demand for a good is inelastic, an increase in its price will cause the total expenditure of the consumers of the good to:
  • a)
    Increase
  • b)
    Decrease
  • c)
    Remain the same
  • d)
    Become zero
Correct answer is option 'A'. Can you explain this answer?
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Verified Answer
If the demand for a good is inelastic, an increase in its price will c...
Since,the demand of the good is inelastic. So,even if the price will increase the consumer will not decrease the consumption of that good.They will continue to purchase that goods. Due to this the production will go on.And so,the expenditure will increase.
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If the demand for a good is inelastic, an increase in its price will c...
Since,the demand of the good is inelastic.So,even if the price will increase the consumer will not decrease the consumption of that good.They will continue to purchase that goods... Due to this the production will go on.And so,the expenditure will increase.
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If the demand for a good is inelastic, an increase in its price will c...
When demand increase simutanously total expenditure of the consumers of good is also increase
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Read the report given below and answer the questions that follow:When, at a particular price level, aggregate demand for final goods equals aggregate supply of final goods, the final goods or product market reaches its equilibrium. Aggregate demand for final goods consists of ex-ante consumption, ex-ante investment, government spending, etc. The rate of increase in ex-ante consumption due to a unit increment in income is called marginal propensity to consume. For simplicity we assume a constant final goods price and constant rate of interest over short run to determine the level of aggregate demand for final goods in the economy. We also assume that the aggregate supply is perfectly elastic at this price. Under such circumstances, aggregate output is determined solely by the level of aggregate demand. This is known as effective demand principle. An increase (decreas e) in autonomous spending causes aggregate output of final goods to increase (decrease) by a larger amount through the multiplier process.At the price level mentioned in the case, Aggregate Supply is ____________.

Read the report given below and answer the questions that follow:When, at a particular price level, aggregate demand for final goods equals aggregate supply of final goods, the final goods or product market reaches its equilibrium. Aggregate demand for final goods consists of ex-ante consumption, ex-ante investment, government spending, etc. The rate of increase in ex-ante consumption due to a unit increment in income is called marginal propensity to consume. For simplicity we assume a constant final goods price and constant rate of interest over short run to determine the level of aggregate demand for final goods in the economy. We also assume that the aggregate supply is perfectly elastic at this price. Under such circumstances, aggregate output is determined solely by the level of aggregate demand. This is known as effective demand principle. An increase (decreas e) in autonomous spending causes aggregate output of final goods to increase (decrease) by a larger amount through the multiplier process.The rate of increase in __________________ due to a unit increment in income is called marginal propensity to consume.

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If the demand for a good is inelastic, an increase in its price will cause the total expenditure of the consumers of the good to:a)Increaseb)Decreasec)Remain the samed)Become zeroCorrect answer is option 'A'. Can you explain this answer?
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