How does the price elasticity of demand change along a linear demand curve? It remains constant. It becomes more elastic as we move down the demand curve. It becomes more inelastic as we move down the demand curve. It changes in a random manner.
Question
How does the price elasticity of demand change along a linear demand curve? It remains constant. It becomes more elastic as we move down the demand curve. It becomes more inelastic as we move down the demand curve. It changes in a random manner.
Solution
The price elasticity of demand becomes more elastic as we move down the demand curve.
Here's why:
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The price elasticity of demand measures how responsive quantity demanded is to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
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On a linear demand curve, the price and quantity demanded are inversely related, meaning as price decreases, quantity demanded increases, and vice versa.
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At high prices (the upper part of the demand curve), a small change in price leads to a large change in quantity demanded, making demand elastic.
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As we move down the demand curve (towards lower prices and higher quantities), a given percentage change in price leads to a smaller percentage change in quantity demanded. This makes demand inelastic.
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Therefore, the price elasticity of demand becomes more elastic as we move down the demand curve.
Similar Questions
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