Q.The price of a commodity falls from ₹10 to ₹8 per unit, and the quantity demanded rises from 40 units to 50 units. Use the total outlay method to determine the degree of price elasticity of demand.

The total outlay method judges elasticity from how total spending on a good changes when its price changes.

Step 1 — Total outlay before the price fall.

Step 2 — Total outlay after the price fall.

Step 3 — Interpretation. Total outlay is unchanged (₹400 = ₹400) even though price has fallen — under the total outlay method, this means demand is unitary elastic ($E_d = 1$).

Cross-check using the arc (average) elasticity formula, which is exact for unitary elasticity even across a large discrete change:

The numerical value is exactly 1, confirming the total-outlay-method conclusion.

Applying the simple percentage method with the original values as base (instead of the average/arc base) on a large discrete change gives a value close to, but not exactly, 1 — students sometimes wrongly conclude elasticity is 'not unitary' from this alone; the total outlay test (equal outlay ⇒ unitary) is the reliable check for such cases.