--%>
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 : Explain the decision making areas of

    Explain the decision making areas of the decision making.

    		•
  • Q : Explain Simultaneous equation method of

    Explain the Simultaneous equation method of Demand Forecasting.

    		•
  • Q : Managerial Economics according to

    Illustrates the managerial Economics according to Spencer and Siegleman?

    		•
  • Q : Differentiate between Private Cost and

    Differentiate between Private Cost and Social Cost.

    		•
  • Q : Physical Productivity of labor Labor’s

    Labor’s physical productivity based most directly on technology and the: (w) tastes and preferences of consumers. (x) transactions demand for money. (y) prices and availability of the other resources. (z) level of per capita income.

  • Q : Equal pay for equal work rule Rigid

    Rigid enforcement of “equal-pay-for-equal-work” law would: (w) raise the wage of minority workers who had been discriminated against. (x) lower the wages of “favored” non minority workers who had received higher wages before. (

    		•
  • Q : Surplus payment from society to

    If a resource is in perfectly inelastic supply (like land), the resource price: (w) has no allocative function. (x) would rise only when resource demand falls. (y) is a surplus payment from society as an entire to resource owners. (z)

    		•
  • Q : Process of Automation Automation is the

    Automation is the process of: (1) adapting equipment which is safer for workers to operate. (2) kinetic engineering which smoothes flows of work on an assembly line. (3) scientific management of robotic factories. (4) substituting sophisticated machin

    		•
  • Q : Slope downwards demand curves for Labor

    Derived demand curves for labor slope downwards since: (w) additional workers are usually less skilled and thus deserve lower wages. (x) when another resource is fixed, hiring more workers ultimately reduces output per hour worked. (y) higher wages us

    		•
  • Q : Marginal revenue productivity When the

    When the marginal revenue product of the last worker hired is superior to the marginal resource cost of the worker, in that case the firm: (w) is experiencing increasing returns to scale. (x) can increase its profits by hiring more la

    		•