If the elasticity of demand is -5, what will happen to revenue (expenditures) if the price is lowered?

Answer 1

Generally in economics, the elasticity of demand is expressed in absolute terms, so it would be said to have an elasticity of demand of 5. Here is how it would be interpreted. For every 1 unit change in price, demand will change 5 units in the opposite direction. So, if you lower the price by a $1, 5 more units would be sold. Thus, total revenue should go up.