__Total outlay method__

Total outlay method is the major method of measuring price elasticity of demand. It is also generally known as total expenditure method. In this method, elasticity is measured by comparing the total expenditure of the consumer during the change in the price of commodities.__Total outlay method__

**According to Alfred Marshal,**

*“Elasticity of demand can be measured by considering the change in price and the subsequent change in the total quantity of goods purchased and the total amount of money spent on it.”*

*Price elasticity of demand can be measured on the following three bases:-*

__The elasticity of demand greater than unity (E___{p}>1)

**The elasticity of demand equal to unity (E**_{p}=1)

**The elasticity of demand less than unity (E**_{p}<1)

The above cases are prescribed in the table given below:

## Price(P) | ## Quantity demanded(Q) | ## Total expenditure(P× Q) | ## Elasticity |

10 | 1 | 10 | E_{p}>1E_{p}>1 |

8 | 2 | 16 | |

6 | 4 | 24 | E_{p}=1E _{p}=1 |

4 | 6 | 24 | |

2 | 8 | 16 | E_{p} <1E _{p} <1 |

1 | 10 | 10 |

In the above figure price and total expenditure/ Outlay are shown along y-axis and x-axis respectively. Point A and B shows the inverse relationship between price and total expenditure. Point B and C are parallel to price. There is no change in total expenditure on the points although the price changes. Point C and D show a positive relationship between price and total expenditure.

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