The Following Diagram Shows Ken's Demand Curve for Neckties

question 24

Multiple Choice

The following diagram shows Ken's demand curve for neckties. When the price of neckties is $5, Ken purchases four neckties. When the price of neckties falls to $4, he purchases five neckties. A decline in the price of neckties causes his expenditure to: ​
Figure 6.3​
​

• A)increase from $20 to $25, increasing his consumer surplus.
• B)increase from $20 to $25, decreasing his consumer surplus.
• C)remain constant at $20, leaving his consumer surplus unchanged.
• D)remain constant at $20, increasing his consumer surplus.
• E)decrease from $20 to $15, increasing his consumer surplus.

---

Definitions:

Inventory

The total amount of goods or materials a business has in stock, potentially for sale or production.

Outlived Usefulness

Refers to an asset or item that has exceeded its functional or strategic value to an organization or individual.

Aging Accounts Receivable

A method of managing accounts receivable by categorizing them according to the length of time an invoice has been outstanding.

Present Value

The current value of a future amount of money or stream of cash flows, given a specified rate of return.