Suppose We Postulate a Linear Demand Curve $Q ^ { d } = a - b P$

question 12

Multiple Choice

Suppose we postulate a linear demand curve $Q ^ { d } = a - b P$ and observe, through supply shifts, two points on the demand curve. At point A, P_A = 2 and Q^d_A = 6. At point B, P_B = 4 and Q^d_B = 2. The choke price for this demand curve is

• A) 10
• B) 2
• C) 5
• D) -2

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Definitions:

Future Income

Prospective earnings or revenue that an individual or entity expects to receive.

Interest Rate

The fee imposed by a creditor on a debtor for the utilization of resources, stated as a proportion of the principal amount.

Net Present Value

A financial metric used to assess the value of an investment by calculating the present value of expected future cash flows minus the initial investment cost.

Current Value

The present monetary or market worth of an asset or investment.