Refer to the accompanying figure. At P = 4, how does the price elasticity of demand for D1 compare to that for D2?
A)It will be equal for D1 and D2.
B)It will be greater for D1 than for D2.
C)It will be lower for D1 than D2.
D)The price elasticity of demand for both D1 and D2 will be greater than one.

Question

Refer to the accompanying figure. At P = 4, how does the price elasticity of demand for D1 compare to that for D2? 
A)It will be equal for D1 and D2. 
B)It will be greater for D1 than for D2. 
C)It will be lower for D1 than D2. 
D)The price elasticity of demand for both D1 and D2 will be greater than one.

Quizplus · Accepted Answer

The formula for the price elasticity of demand at a given point is (P/Q)× (1/slope). For D1, at a price of 4, (4/6)× (1/2)= 1/3, and for D2, at a price of 4, (4/12)× (1/0.5)= 2/3. So, at P = 4, the price elasticity of demand is lower for D1 than D2.

Refer to the Accompanying Figure