P13. Elasticity and total expenditure
13.1 Elasticity is defined as the ratio of the percentage change in quantity demanded to the percentage change in price.
13.1.1 If demand is elastic, a decrease in price is associated with a larger percentage rise in quantity demanded.
Demand Elasticity
13.2 When demand is inelastic, a fall in price brings about a fall in total expenditure.
13.3 In summary, when demand is elastic, price and total expenditure move in opposite directions.
13.3.1 In a linear demand curve.
13.3.1.1 Above the midpoint, demand is elastic. In the elastic range, a fall in price accompanies a rise in total expenditure.
13.3.1.2 Below the midpoint, demand is inelastic. In the inelastic range, a fall in price accompanies a fall in total expenditure.
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