Suppose the price elasticity of demand for good is 0·2. If the price of rises by 2·8%, what effect will it have on the total expenditure on good ?
Tap an option to check your answer.
1 mark, −0.25MicroeconomicsDemand theory and elasticityElasticity, total revenue and total expenditureModerateabout 1 min
JNU SSS 2011 Question 51: Demand theory and elasticity
Answer and worked solution
Checking your account…
Plain-text version
Suppose the price elasticity of demand for good X is 0·2. If the price of X rises by 2·8%, what effect will it have on the total expenditure on good X? (A) Expenditure on X will fall by 5·6% (B) Expenditure on X will rise by 5·6% (C) Expenditure on X will rise by 2·2% (D) Expenditure on X will fall by 2·2%
Demand theory and elasticity has come up 161 times in 7 exams since 2004.
What this question tests
This question is on Elasticity, total revenue and total expenditure, part of Demand theory and elasticity in Microeconomics.
How the elasticity of demand decides whether a price change raises or lowers revenue or spending.
TestStop has 14 past-paper questions on this subtopic.
Similar questions from other papers
- Goods are substitutes when an increase in price of one leads to _ of other commodity.
- Let e, R, and p represent own price elasticity of demand, total revenue, and price, respectively for a good. If (∂ R)/(∂ p)<0, then
- If the demand function is Q = 100 - 2P, when P = 25; then elasticity of demand will be:
- The decision by consumers to buy larger quantities of a good at each possible price can not be caused by
- The demand function is given as log Q = log A + 0.5log P, where Q is quantity, P is the unit price of the good and A is a positive real number. The own price elasticity…
Question from the JNU SSS 2011 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.