Expenditure on a good

Indian Economy glossary

Also called: Total expenditure, outlay · Topic: Consumer Behaviour, Demand and Elasticity · NCERT: Class 12, Ch 2 "Theory of Consumer Behaviour"

Meaning

Expenditure on a good, also called total expenditure or outlay, is the total amount a buyer spends on that good. It equals the price per unit multiplied by the quantity bought:

E = P × Q

Seen from the seller's side, the same amount is the seller's total revenue from that good. How expenditure changes when price changes shows whether demand is elastic, inelastic or unitary elastic.

Example

A household buys 5 kg of rice at ₹40 per kg, so its expenditure is ₹200. If a bumper harvest pushes prices down sharply, farmers may earn less in total. Food demand is inelastic, so the price falls by more than the quantity sold rises, and P × Q falls. This is Gregory King's law.

Don't confuse with

  • Price: price is the amount paid per unit. Expenditure is the total for all units bought.

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