Q.A fall in the price of a commodity from Rs. 10 to Rs. 8 per unit causes the consumer's total expenditure on it to rise from Rs. 200 to Rs. 240. Using the Total Outlay Method, determine the type of price elasticity of demand.

This is a direct application of the Total Outlay Method — compare how total expenditure has moved after the price fall.

Price: Rs. 10 to Rs. 8 per unit (fell). Total outlay: Rs. 200 to Rs. 240 (rose). Since price fell and outlay rose, by the Total Outlay Method's rule, demand is relatively elastic ($E_d>1$).

The Total Outlay Method compares total expenditure (Price $\times$ Quantity) before and after the price change, without computing a numerical value of $E_d$.

Here, price has FALLEN, from Rs. 10 to Rs. 8 per unit. At the same time, total outlay has RISEN, from Rs. 200 to Rs. 240.

By the Total Outlay Method's rule: when price falls and total outlay rises, demand is relatively elastic ($E_d>1$). This makes economic sense — outlay is Price $\times$ Quantity, so for outlay to rise even as price falls, quantity demanded must have risen by a LARGER percentage than price fell (here, quantity must have risen from 20 units at Rs. 10 to 30 units at Rs. 8, a 50% rise in quantity against only a 20% fall in price).

Students sometimes think a RISE in total outlay always means demand is inelastic — the rule instead depends on the DIRECTION price itself is moving; outlay rising while price FALLS signals elastic demand, but outlay rising while price RISES would signal inelastic demand.