When percentage change in quantity demanded is less than the percentage change in price i.e., if the good is price inelastic, the expenditure on the good would ____________ ?

Identify the correct option from the following :

Change in same direction as the price change

The correct answer is option (2) : Change in same direction as the price change

When the percentage change in quantity demanded is less than the percentage change in market price, eD is estimated to be less than one and the demand for the good is said to be inelastic at that price. Demand for essential goods is often found to be inelastic.

When the demand for a good is price inelastic, consumers are relatively insensitive to price changes. This means that when the price of the good increases, the quantity demanded decreases by a smaller percentage. Despite the decrease in quantity demanded, the increase in price leads to a larger percentage increase in total expenditure on the good. Conversely, if the price decreases, the quantity demanded increases, but the decrease in price leads to a larger percentage decrease in total expenditure. Therefore, when a good is price inelastic, the expenditure on the good changes in the same direction as the price change. If the price increases, expenditure also increases; if the price decreases, expenditure decreases.