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. Lower prices result in higher total revenue (price times quantity) only if demand is elastic.

Question

Quizplus · Accepted Answer

If the area 0P₁AB is less than the area 0P₂CD, it means that the percentage change in quantity demanded is more than the percentage change in price. This is a characteristic of elastic demand. Therefore, the price elasticity of demand between point A and point C is elastic.