Question

A good's choke price is the dollar amount at which none of the good will be purchased and below which units will be purchased. If an individual's demand function for a good is given by the linear equation Q = 10 - 0.5P, then the choke price is:

Answer 1

The choke price given the demand function Q = 10 - 0.5P is $20. This is the price beyond which no units of the good will be purchased according to the law of demand, which indicates an inverse relationship between price and quantity demanded.

Step-by-step explanation:

The choke price in an individual's demand function for a good is the point where the price is high enough that the quantity demanded falls to zero. Given the linear demand equation Q = 10 - 0.5P, to find the choke price, we set the quantity Q to zero and solve for P:

• 0 = 10 - 0.5P
• 0.5P = 10
• P = 20

Therefore, the choke price for this good is $20. Beyond this price, no units of the good will be purchased, and below this price, units will start to be purchased by consumers. Price is what a buyer pays for a unit of the specific good or service, and quantity demanded refers to the number of units that consumers purchase at that price. According to the law of demand, there is an inverse relationship between the price of a good and the quantity demanded; as price rises, the quantity demanded typically falls, and vice versa.