If an individual's demand function for a good is given by Q=100-0.5P, what happens to expenditures as price decreases from the choke price to zero?

To understand the behavior of expenditures as price decreases from the choke price to zero, we start by analyzing the demand function Q = 100 - 0.5P. The choke price is the price at which demand falls to zero, which occurs when Q equals zero. Setting the demand equation to zero (0 = 100 - 0.5P) allows us to find the choke price: P = 200.

At this point, if price drops from 200 to a lower value, we can observe how quantity demanded changes. As the price decreases, the quantity demanded (Q) increases, leading to varying expenditures. Expenditure, or total revenue (TR), can be calculated by multiplying price (P) by quantity (Q): TR = P × Q.

Initially, as price decreases from the choke price, expenditure starts to rise significantly because there is a relatively large increase in quantity demanded for a small decrease in price. This initial increase in quantity due to price drops generates higher total revenues.

However, as we continue to decrease the price, the quantity demanded keeps increasing, but the rate at which expenditures grow might start to slow down. At some point, the increase in quantity demanded will not be sufficient to offset the loss in revenue