Exercise-1 on Elasticity and Expenditure/Revenue: Solutions

Question: Assune Gasoline price increases by 10%.
Does total expenditure on gasoline rise or fall?

Solutions:
Expenditure = P × Q
Gasoline is a fuel that drivers need a certain amount of each period of time. Gas prices may change every day.
So, its demand is inelastic, Q will fall less than 10%, so expenditure rises.

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Date of last modification: 2019