Sia
Question
Microeconomics
Posted 7 months ago
Three points along a linear demand curve are shown in this graph.
What statement about these points is true?
Choose 1 answer:
(A) All three points have the same value of elasticity since the this curve is constant.
(B) The price elasticity of demand cannot be compared for these points without more information.
(c) Point 3 has the highest price elasticity.
(D) Point 1 has the highest price elasticity of the three points.
(E) Point 1 and 3 have elastic price elasticities, but point 2 is pric inelastic.
Related content
Introduction to price elasticity of demand
Sign in to unlock the answer
Answer from Sia
Posted 7 months ago
Solution
a
Definition of Price Elasticity of Demand: Price elasticity of demand (PED) measures the responsiveness of the quantity demanded of a good to a change in its price. It is calculated using the formula:
b
Elasticity on a Linear Demand Curve: On a linear demand curve, the price elasticity of demand varies along the curve. The upper part of the demand curve is more elastic, while the lower part is more inelastic
c
Point 1 Analysis: Point 1 is at the top of the demand curve, where the price is high and quantity demanded is low. This region is typically more elastic
d
Point 3 Analysis: Point 3 is at the bottom of the demand curve, where the price is low and quantity demanded is high. This region is typically more inelastic
e
Conclusion: Based on the position of the points on the demand curve, Point 1 has the highest price elasticity of the three points
Answer
(D) Point 1 has the highest price elasticity of the three points.
Key Concept
Price elasticity of demand varies along a linear demand curve, being more elastic at higher prices and less elastic at lower prices.
Explanation
Point 1 is at the higher price end of the demand curve, where the demand is more elastic, while Point 3 is at the lower price end, where the demand is more inelastic.
Not the question you are looking for? Ask here!
Enter question by text
Enter question by image
Unlock Smarter Learning with AskSia Super!
Join Super, our all-in-one AI solution that can greatly improve your learning efficiency.
30% higher accuracy than GPT-4o
Entire learning journey support
The most student-friendly features
Study Other Question