If Demand Is Inelastic, an Increase in the Price of a Good

question 89

Multiple Choice

If demand is inelastic, an increase in the price of a good will cause total expenditures on the good to

• A) fall.
• B) remain constant since the decrease in quantity sold is exactly offset by the price increase.
• C) rise.
• D) rise if it is a normal good and fall if it is an inferior good.

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Definitions:

Classical Region

In economic theory, a phase where the supply of labor is abundant and the wage rates are therefore determined by the cost of living, not by the demand for labor.

Aggregate Supply Curve

An economic curve illustrating the overall supply of goods and services by all businesses and the government at various overall price levels in a given period.

Maximum Output Level

refers to the highest amount of production a company can achieve with the current resources and technology.

Production Possibilities Frontier

A curve representing a hypothetical model of a two-product economy operating at full employment.