Exhibit 5-26 Refer to Exhibit 5-26.As you move down the demand curve from A to B to C to D, which of the following describes what happens to the price elasticity of demand?
A)nothing
B)goes from elastic at A and gets increasingly inelastic as you go to B and C and D
C)goes from perfectly inelastic at A and gets increasingly elastic as you go to B and C and D
D)goes from inelastic at A and gets increasingly elastic as you go to B and C and D
E)goes from inelastic at A and gets increasingly elastic as you go to B but then gets increasingly inelastic as you go to C and D

Question

Exhibit 5-26  Refer to Exhibit 5-26.As you move down the demand curve from A to B to C to D, which of the following describes what happens to the price elasticity of demand?
A)nothing 
B)goes from elastic at A and gets increasingly inelastic as you go to B and C and D 
C)goes from perfectly inelastic at A and gets increasingly elastic as you go to B and C and D 
D)goes from inelastic at A and gets increasingly elastic as you go to B and C and D 
E)goes from inelastic at A and gets increasingly elastic as you go to B but then gets increasingly inelastic as you go to C and D

Quizplus · Accepted Answer

As you move down the demand curve from A to B to C to D, the price decreases and the quantity demanded increases. This makes the demand elastic. At point A, demand is inelastic but as you move to B, C, and D, the demand becomes more elastic due to the availability of substitutes and more time to adjust to the changes in price. Therefore, the price elasticity of demand increases as you move from A to D. Choice B and C are incorrect as they describe the opposite effect. Choice E is incorrect as it describes a mixed effect.