Starting at the top of a straight-line downward sloping demand curve, as the price falls, total expenditures will
A) initially increase and then decrease.
B) initially decrease and then increase.
C) increase along the entire demand curve.
D) decrease along the entire demand curve.

Question

Quizplus · Accepted Answer

At the top of a downward sloping demand curve, demand is elastic, so a price decrease leads to an increase in total expenditures. As we move down the curve, demand becomes inelastic, and further price decreases lead to a decrease in total expenditures.

Starting at the Top of a Straight-Line Downward Sloping Demand