#cfa #cfa-level-1 #economics #microeconomics #reading-13-demand-and-supply-analysis-introduction #study-session-4 #summary
The relationship among own-price elasticity of demand, changes in price, and changes in total expenditure is as follows: If demand is elastic, a reduction in price results in an increase in total expenditure; if demand is inelastic, a reduction in price results in a decrease in total expenditure; if demand is unitary elastic, a change in price leaves total expenditure unchanged.
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SUMMARYood causes an increase in demand for the other good—are called complements. Goods with positive cross-price elasticity of demand—a drop in the price of one good causes a decrease in demand for the other—are called substitutes.
<span>The relationship among own-price elasticity of demand, changes in price, and changes in total expenditure is as follows: If demand is elastic, a reduction in price results in an increase in total expenditure; if demand is inelastic, a reduction in price results in a decrease in total expenditure; if demand is unitary elastic, a change in price leaves total expenditure unchanged.
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