Multiple choice

When demand is inelastic, an increase in the price of a commodity would cause the total expenditure of the consumers to

  1. increase

  2. decrease

  3. first increase and then decrease

  4. none of these
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A Correct answer
Explanation

When demand is inelastic, consumers are less sensitive to price changes. Therefore, if the price increases, the percentage decrease in quantity demanded is smaller than the percentage increase in price, leading to an increase in total expenditure.

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