Total Outlay Method

Total Outlay Method, was used by Marshall and his followers. The method consists of comparing changes in price and the quantity demanded and the consequent change in total outlay by studying the demand schedule.

• If total amount spent on the purchase of a commodity remains the same with a change in price, elasticity of demand is said to be unity.
• If total amount spent on the consumption of a commodity increases with a fall in price, or decreases with a rise in price, elasticity of demand is greater than unity.
• If total amount spent decreases with a decrease in price or increases with a rise in price, elasticity of demand is less than unity.