--%>
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 : Economic Efficiency to make one person

    While an economic change creates one person worse off without influencing anyone else, this is: (w) good for society. (x) an inefficient change. (y) neither bad nor good for society. (z) strictly a macroeconomic issue.

    Q : What is Increasing Returns to scale

    What is Increasing Returns to scale?

    		•
  • Q : Wage payments by total production cost

    Wage payments like a proportion of total production cost are positively associated to the: (1) ease of substitution between capital and labor. (2) wage elasticity of demand for labor. (3) extent of automation in the industry. (4) human capital created

    		•
  • Q : Explain elements of managerial

    Illustrates the elements of managerial economics as a tool for decision making?

    		•
  • Q : What did professor Marshall illustrates

    What did professor Marshall illustrates about Law of Demand? Answer: According to Marshall “the amount demanded raises along with reduces in price and diminish

    		•
  • Q : Requirement of Screening Boris operates

    Boris operates a local landscaping company, needs each potential employee to lift a 200 pound tree before being hired whole-time. This obligation is an example of: (1) signaling. (2) discrimination. (3) screening. (4) derived demand. (5) automation.

    Q : Investment in human capital in market

    Most economists would categorize the bulk of the funds spent upon your college education like: (1) an investment in human capital. (2) financial capitalization. (3) consumption. (4) specific training. (5) personal saving. Please gu

    		•
  • Q : Extension/contraction and shift in

    Differentiate between extension/contraction and shift in demand?

    		•
  • Q : Techniques of economic forecasting

    Illustrates the techniques of economic forecasting in briefly?

    		•
  • Q : Total supply of human capital in the

    Government policy is probably to help raise the total supply of human capital within the long run through: (w) increased public education and retraining programs. (x) minimum wage legislation. (y) laws prohibiting discrimination in employment. (z) str

    		•