Hi,
when we have the elasticity of demand =1 how the expenditure will remain constant despite the change in price?
Thanks
160 Rotanola Co produces another phone with a price elasticity of demand equal to one. Indicate, by selecting the relevant boxes in the table below, whether each of the following
statements are true or false.
Demand will remain constant despite price changes.
TRUE
FALSE
If price increases by 5%, demand will fall by 10%.
TRUE
FALSE
Total expenditure will remain constant despite price changes.
TRUE
FALSE
Ask the Tutor ACCA PM
When Price elasticity of demand = 1
2y ago#1This is not a real past exam question but one that BPP invented
Total expenditure will remain constant despite price changes.
Is false
The price goes up the demand will fall by the same % (and vice versa) and so the total will not change a lot, it will not stay constant.
If price increases by 5%, demand will fall by 10%.
Is false
The price elasticity of demand is the percentage change in demand induced by the percentage change in price.
Total expenditure will remain constant despite price changes.
Is false
If the price changes then the demand will also change. If the demand changes then the production changes and therefore the total expenditure will change.
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