Total Expenditure Method :

Total Expenditure Method : It measures price elasticity of demand on thebasis of change in total expenditure incurred on the commodity by a household as a result of change in its price.

There are three conditions :

         If the Total Expenditure on the commodity changes inversely with the price change, the demand is relatively elastic (ed>1)

         If the total expenditure on the commodity remains the same as before and after change in price, then demand is said to be unitary elastic (ed = 1)

         If the total expenditure on the commodity increases with an increase in its price and decreases with a decrease in the price, then demand is relatively inelastic (ed < 1)

Geometric Method : Elasticity of demand at any point is measured bydividing the length of lower segment of the demand curve with the length of upper segment of demand curve at that point.
The value of ed is unity at mid point of any linear demand curve.
Diagram to show Geometric or point method :

Elasticity of demand at given point.

Ed Lower segment of the demand curve
Upper segment of the demand curve

D is mid point of the demand curve.




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