Refer to the accompanying figure. If the price of this good is initially $3, and price falls by a few cents, then what will happen to total expenditure on this good?
A)Total expenditure will rise.
B)Total expenditure will not change.
C)Total expenditure will fall.
D)Total expenditure will fall to 0.

Question

Refer to the accompanying figure. If the price of this good is initially $3, and price falls by a few cents, then what will happen to total expenditure on this good? 
A)Total expenditure will rise. 
B)Total expenditure will not change. 
C)Total expenditure will fall. 
D)Total expenditure will fall to 0.

Quizplus · Accepted Answer

The midpoint of this demand curve occurs at a price of $4 and a quantity of 8 (in thousands). This implies that at a price of $3, we would be on the inelastic portion of the demand curve, so that a fall in price will lower total expenditure.

Refer to the Accompanying Figure