We are independent & ad-supported. We may earn a commission for purchases made through our links.

Advertiser Disclosure

Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.

How We Make Money

We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently from our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is Total Expenditure?

Jim B.
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Total expenditure is an economic term used to describe the total amount of money that is spent on a product in a given time period. This amount is achieved by multiplying the quantity of the product purchased by the price at which it was purchased. The way that total expenditure changes over time is dependent upon price changes in that time period. How much the price change affects the expenditure amount is closely related to how elastic the demand for the product might be.

Economists are constantly looking for ways to measure the relationship between price levels of a certain product and the corresponding behavior of consumers toward that product. It is not as simple as lowering the price of a product to create more purchases of that product. Demand levels also are an important factor in determining at what price level the greatest response to the product will occur. The total expenditure spent on a given product is always tied into the price and demand levels.

To calculate the total expenditure of a certain product at a given time, the quantity of the product sold and the price for which it was sold first need to be known. For example, imagine that a company sells cars and decides upon a price of $20,000 US Dollars (USD) for a single car. In a given amount of time, the company sells 200 cars at that price. Using this case, the expenditure total would be 20 multiplied by $20,000 USD, which comes to $400,000 USD.

Of course, the amount of cars sold was not only determined by the price level at that specific time. It is important when considering total expenditure to also consider the amount of demand for that car or any other product and how that affects the amount sold. Economists take a close look at the elasticity of demand when considering expenditure. Elasticity of demand is a measurement of how flexible the demand level might be for a certain product.

In the case of total expenditure, there are three possible results that can occur from differing levels of demand elasticity. If the demand for a product is relatively elastic, the expenditure levels will move in the opposite direction of any price movement. At relatively inelastic levels, the expenditure should move in the same direction as any price changes. Finally, when the demand is at a baseline level known as unit elastic, any change in price will have no effect whatsoever on the amount of expenditure for the product.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Jim B.
By Jim B. , Former Writer
Freelance writer - Jim Beviglia has made a name for himself by writing for national publications and creating his own successful blog. His passion led to a popular book series, which has gained the attention of fans worldwide. With a background in journalism, Beviglia brings his love for storytelling to his writing career where he engages readers with his unique insights.

Discussion Comments

By SkyWhisperer — On Sep 29, 2011

@NathanG - Okay, then, let’s apply the principle of total expenditure and elasticity of demand to taxes, and the current federal debt.

The government wants to tackle the federal debt by increasing taxes. Will total revenue increase or decrease? That is the core of the big tax debate.

I argue that people’s desire to pay more taxes is fairly elastic. In other words, they’re willing to scale back some of their income producing activities if taxes increase.

No, they won’t quit their jobs, but they may scale back a part time business for example, or find other ways to reduce their taxable income.

Many government officials seem to have an inelastic view of consumer – and small business – activity. Raise taxes, they say, and people will keep on giving.

I don’t believe that myself, and frankly I haven’t seen an example anywhere that tells me otherwise.

By NathanG — On Sep 28, 2011

I like the article’s presentation. Total expenditure is actually a simple concept to understand, but it’s the principle of demand elasticity that puts a wrinkle in things, and affects how much people will actually spend on a product.

Personally, I would put things like total energy expenditure in the column of inelastic demand. In other words, you’ve got to have gas for your car. You can buy a more fuel efficient car if you want, but most cars still run on gas. Therefore if gas prices increase, you’re still buying.

On the other hand, recreational consumables I would think would fall in the column of elastic demand. When times are tough, you can cut back on going to the movies and eating out and buying flat panel TVs. Here I don’t think raising prices will cause an increase in total expenditure; rather, you’d see a decrease.

Jim B.

Jim B.

Former Writer

Freelance writer - Jim Beviglia has made a name for himself by writing for national publications and creating his own...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.