Figure 6-5 -In Figure 6-5, If Price Falls from Point a to Point

question 36

Multiple Choice

Figure 6-5
-In Figure 6-5, if price falls from point A to point B along the unit-elastic demand curve,

• A)total expenditure remains unchanged.
• B)total expenditure increases.
• C)total expenditure decreases.
• D)total expenditure first increases and then declines.

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Definitions:

Production Possibilities Frontier

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

Aggregate Demand Curve

A curve that represents the total demand for goods and services within an economy at various price levels, all else being equal.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy, often used to measure inflation.

Aggregate Supply Curve

Illustrates the total output of goods and services that producers in an economy are willing to supply at different price levels, in the short run or the long run.