Study the table for a good.
| % change in price | % change in quantity demanded |
|---|---|
| –10 | +25 |
What happens to the expenditure on the good, and what is the nature of its demand?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Expenditure rises; price elastic
Given:
Change in price = −10%
Change in quantity demanded = +25%
When quantity changes by a larger percentage than price, demand is price elastic and expenditure moves opposite to price.
|eD| = 25/10 = 2.5, which is more than 1
Price falls, so expenditure rises
NCERT (2026-27): “2.6.3 Elasticity and Expenditure … Now consider a decline in the price of the good. If the percentage increase in quantity is greater than the percentage decline in the price, the expenditure on the good will go up(see row 4 in table 2.5). On the other hand, if the percentage increase in quantity is less than the percentage decline in the price, the expenditure on the good will go down(see row 5 in table 2.5). … The expenditure on the good would change in the opposite direction as the price change if and only if the percentage change in quantity is greater than the percentage change in price, ie if the good is price-elastic (see rows 2 and 4 in table 2.5). …” |