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.
Upper segment of the demand curve
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.