--%>
Assignment Help - homework help

Explain the Expenditure Method of Measurement of Elasticity

Explain the Expenditure Method of Measurement of Elasticity.

E

Expert

Verified

Expenditure or Outlay Method: Expenditure method was developed through Marshall. In this method, the elasticity is measured through estimating the changes in whole expenditure like a result of changes in price and quantity demanded. It has three components.

When the price changes but whole expenditure remains constant then unit elasticity exists.

When the price changes but whole expenditure moves in the opposite directions then demand elastic is (>1).

When the price changes and whole revenues moves in similar direction, demand is inelastic (<1).

It can be expressed by the given diagram.

1197_Expenditure Method.png

   Related Questions in Managerial Economics

  • Q : Estimate average wage differentials

    From the fact which the average wages of women into the United States is lower than the average wages of men, we can estimate that women are: (1) discriminated against in hiring and pay. (2) less qualified workers than men. (3) less interested into wa

    		•
  • Q : What are differences between

    What are the differences between differential cost and explicit cost?

    		•
  • Q : External factors in governing prices

    What are the external factors in governing prices?

    		•
  • Q : Income effect of a wage increasing When

    When the income effect of a wage increase is more powerful in that case the substitution effect, the: (1) labor supply curve will be “backward bending.” (2) unemployment rate will rise since more people will be available for work. (3) valu

    		•
  • Q : Illustrates the merits of scarcity

    Illustrates the merits of scarcity definition?

    		•
  • Q : Illustrates the types of Demand

    Illustrates the types of Demand Forecasting?

    		•
  • Q : Marginal Product of Labor in Firm If

    If this firm maximizes profit, this will be producing under circumstances of: (1) increasing returns to labor. (2) economies of scale. (3) diminishing returns to labor. (4) constant returns to labor. (5) adverse selection and moral hazard.

    Q : More Labor productivity American

    American workers tend to be more productive than counterparts of their in South America or Asia into part since they have: (1) superior natural genetic endowments. (2) access to better sports programming, that promotes teamwork. (3) more capital to work with, and supe

    		•
  • Q : Define the term full cost concept

    Define the term full cost concept.

    		•
  • Q : Illustrates the conditions of price

    Illustrates the conditions of price discrimination?

    		•