Figure 4-5 Total Expenditure and Quantity Demanded
Figure 4-5 illustrates the relationship between elasticity and total
expenditure; it is based on the linear demand curve in Figure 4-2. Total
expenditure at each of a number of points on the demand curve is
calculated in the table, and the general relationship between total
expenditure and quantity demanded is shown by the plotted curve. In the
figure we see that expenditure reaches its maximum when elasticity is
equal to 1. [ 8 ]
The change in total expenditure on a product in response to a change
in price depends on the elasticity of demand. The table and graph are
based on the demand curve shown in Figure 4-2. For quantities