Total outlay (or total expenditure) refers to the total amount spent on goods or services and is calculated as the product of price per unit and quantity purchased (Total Outlay = Price × Quantity).
If the price increases and the quantity purchased remains constant, the total outlay will increase. However, if the quantity purchased decreases due to the price increase (which can occur if demand is elastic), the total outlay may not increase and could even decrease.
In summary:
- Price increase with constant quantity → Total outlay increases.
- Price increase with reduced quantity (elastic demand) → Total outlay may decrease or remain unchanged.
- Price increase with increased quantity (inelastic demand) → Total outlay increases further.
The specific effect on total outlay depends on the price elasticity of demand for the product.