Explain why when the demand curve for a good is elastic, a one percent

Explain why when the demand curve for a good is elastic, a one percent reduction in the price of the good will increase a consumer’s expenditure on the good.

What will be an ideal response?

 

ANSWER

When a good has an elastic demand, a one percent decrease in the price will result in a greater than one percent increase in the quantity demanded. Thus, the price multiplied by the quantity will increase when the price declines by one percent.

 

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