Question

As a result of increase in the price of good X, whose demand is inelastic, the total expenditure of the consumers of good X, will
1. become zero
2. not change
3. decrease
4. increase

Answer 1

Correct Answer - Option 4 : increase

The correct answer is increase.

Inelastic is an economic term referring to the static quantity of a good or service when its price changes. Inelastic means that when the price goes up, consumers’ buying habits stay about the same, and when the price goes down, consumers’ buying habits also remain unchanged.

• Here, in this case the price of the good X is inelastic, meaning it will not change with the adjoining circumstances.
• Therefore, when the consumer purchase it, he will be spending more as the price for the same quantity of the good has gone up. 
• Therefore, the total expenditure of the consumers of good X will increase.