CA Foundation P4 · Chapter 2 · Question 6 of 15
When the price of a good falls, total expenditure on it remains unchanged. According to the total outlay method, demand is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Unitary elastic
Explanation
Under Marshall's total outlay method: if total expenditure rises when price falls, demand is elastic (e > 1); if it falls, demand is inelastic (e < 1); if it remains the same, demand is unitary elastic (e = 1).
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