If the price of a good decreases and total expenditures on other goods decreases, how is the demand for the good with the changed price characterized?

When the price of a good decreases and total expenditures on other goods also decrease, this scenario indicates that consumers are likely reallocating their spending towards the good that has decreased in price. This behavior suggests that the demand for the good is elastic, as a decrease in price leads to a proportionately larger increase in the quantity demanded.

In elastic demand, the percentage change in the quantity demanded is greater than the percentage change in price. When a good is considered elastic, consumers are very responsive to price changes. If the price decreases and consumers are spending less on other goods, it shows that they are choosing to purchase more of the cheaper good instead, indicating significant responsiveness in their purchasing behavior.

In contrast, if demand were inelastic, a decrease in price would not significantly increase the quantity demanded, meaning that total expenditure on the product itself would change less dramatically, often leading to increased spending on other goods rather than reallocating it. Thus, the situation described signifies that consumers are reacting significantly to the price decrease, reinforcing the characterization of demand as elastic.