Figure 6-4
-Which of the following statements is true about the price elasticity of demand along a downward-sloping linear demand curve?
A) It is inelastic at high prices and elastic at low prices.
B) It is unit-elastic throughout the demand curve.
C) It is elastic at high prices and inelastic at low prices.
D) It is perfectly elastic at very high prices and perfectly inelastic at very low prices.

Question

Figure 6-4 
-Which of the following statements is true about the price elasticity of demand along a downward-sloping linear demand curve?
A) It is inelastic at high prices and elastic at low prices. 
B) It is unit-elastic throughout the demand curve. 
C) It is elastic at high prices and inelastic at low prices. 
D) It is perfectly elastic at very high prices and perfectly inelastic at very low prices.

Quizplus · Accepted Answer

Along a linear demand curve, the elasticity of demand varies at different price points. At high prices, demand is relatively inelastic as consumers are willing to buy the good even if the price increases. At low prices, demand is relatively elastic as consumers are more price-sensitive and a small change in price can lead to a large change in quantity demanded. Therefore, the correct statement is that the price elasticity of demand is elastic at high prices and relatively inelastic at low prices. Choice B is incorrect because unit elasticity only occurs at the midpoint of the demand curve. Choice A and D are incorrect because they generalize the elasticity across the entire demand curve, ignoring the fact that it varies at different price points.

Figure 6-4 -Which of the Following Statements Is True About the Price