Explain the Expenditure Method of Measurement of Elasticity
Explain the Expenditure Method of Measurement of Elasticity.
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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.
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If the wage rate increases from $25 per hour to $40 per hour, in that case the elasticity of the supply of labor from this worker is roughly: (i) zero. (ii) 7/15. (iii) 13/15. (iv) one. (v) minus 13/15. Discover Q & A Leading Solution Library Avail More Than 1437601 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads No hassle, Instant Access Start Discovering 18,76,764 1958707 Asked 3,689 Active Tutors 1437601 Questions Answered Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!! Submit Assignment
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