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.
![](file:///C:/Users/AMINBU~1/AppData/Local/Temp/msohtmlclip1/01/clip_image002.jpg)
![](file:///C:/Users/AMINBU~1/AppData/Local/Temp/msohtmlclip1/01/clip_image002.jpg)
Upper segment of the demand curve
![](file:///C:/Users/AMINBU~1/AppData/Local/Temp/msohtmlclip1/01/clip_image006.jpg)
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.
![](file:///C:/Users/AMINBU~1/AppData/Local/Temp/msohtmlclip1/01/clip_image002.jpg)
The value of ed is unity at mid point of any linear demand curve.
![](file:///C:/Users/AMINBU~1/AppData/Local/Temp/msohtmlclip1/01/clip_image002.jpg)
Diagram to show Geometric or point method :
Elasticity of demand at given point.
Ed Lower segment
of the demand curve
![](file:///C:/Users/AMINBU~1/AppData/Local/Temp/msohtmlclip1/01/clip_image004.jpg)
D is mid point of the demand curve.
![](file:///C:/Users/AMINBU~1/AppData/Local/Temp/msohtmlclip1/01/clip_image006.jpg)