The $q (1 + e_D) < 0$, and hence, ΔE (expenditure) has the opposite sign as Δp (price), if _____.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → $e_D< -1$
The given condition is: q(1+eD)<0
if eD < –1, then q (1 + eD ) < 0, and hence, ∆E has the opposite sign as ∆p,
if eD > –1, then q (1 + eD ) > 0, and hence, ∆E has the same sign as ∆p,
if eD = –1, then q (1 + eD ) = 0, and hence, ∆E = 0.