State the ‘total expenditure method’ of measuring price elasticity of demand.

There are many methods of determining the price elasticity of demand, such as the arc method and the point method, but the total outlay or the total expenditure method is a simple way of measuring price elasticity. It looks at the effect of changes in price on the total revenue earner by the producer. Total outlay (or revenue) is found by multiplying price by the quantity that would be demanded at that price. In effect, the total outlay (or total expenditure) by consumers on a certain product is equivalent to the total revenue that sellers of the product would receive at that price.