Assume that the demand curve for a commodity is represented by the equation Q = 25 - 1.3P.Calculate the change in total spending for this commodity when price falls from $4.50 to $4.20.

Question

Quizplus · Accepted Answer

To calculate the change in total spending, we need to find the area of the rectangle formed by the initial price ($4.50) and the initial quantity demanded (Q = 25 - 1.3(4.50) = 18.25) and then subtract the area of the rectangle formed by the new price ($4.20) and the new quantity demanded (Q = 25 - 1.3(4.20) = 18.46).

Initial spending = $4.50 x 18.25 = $82.13
New spending = $4.20 x 18.46 = $77.52
Change in spending = Initial spending - New spending = $82.13 - $77.52 = $4.61

Therefore, the correct answer is B, total spending declines by $4.11 (rounded to two decimal places).

Assume That the Demand Curve for a Commodity Is Represented