Microeconomic - price elasticity of demand

Question

Using a diagram, describe how a decrease in price affects volume expenditure when the price elasticity of demand is

i. elastic

ii. not elastic

Answer 1

Sure!

i. When price elasticity of demand is elastic, that means that a 1% change in price will elicit a greater than 1% decrease in quantity demanded for the object.

ii. When price elasticity of demand is inelastic, that means that a 1% change in price will elicit a less than 1% decrease in quantity demanded for the object.

Both of these result in a decrease in demand; it's just a matter of how much of a decrease. Hope this helps!