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Question
With the help of a diagram, explain the condition when EP < 1.
Solution
Ep < 1: Inelastic Demand
If the price of the commodity falls, total expenditure decreases, and with a rise in its price, total expenditure increases, then demand for that commodity will be inelastic or less than one. In other words, when there is a direct relationship between the price and total expenditure, the price elasticity of demand will be less than one.
Diagram: The demand curve is relatively steeper, indicating that a large change in price leads to a smaller change in quantity demanded.
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