Refer to Figure 20.2. If the area 0P₁AB is less than the area 0P₂CD, we can conclude that the price elasticity of demand between point A and point C is A) Elastic. B) Inelastic. C) Unitary elastic. D) Impossible to determine. It depends on whether the price has increased or decreased.

Question

Quizplus · Accepted Answer

According to the figure, the area 0PS1U1B11S1U1B0AB represents a larger change in quantity demanded compared to the change in price (represented by the area 0AB1B11S1U1B0). On the other hand, the area 0PS1U1B12S1U1B0CD represents a smaller change in quantity demanded compared to the change in price (represented by the area 0CD1B12S1U1B0). This indicates that the demand is more responsive to changes in price between point A and point C, which means the price elasticity is elastic. Therefore, the answer is A) Elastic.