As we move down the demand curve (lowering price), price elasticity of demand: S

ID: 1150279 • Letter: A

Question

As we move down the demand curve (lowering price), price elasticity of demand:

Supporting Materials

As we move down the demand curve (lowering price), price elasticity of demand:

Supporting Materials

2-4 Use the same graph

For the points shown on the graph, comparing price elasticity of demand we see that:

For the points shown on the graph, price elasticity of demand for Rolla Cola is:

1/6

For the points shown on the graph, price elasticity of demand for Citrus Attack is:

none of these answers is correct Price 20 18 16 14 121 10 100 200 400 500 600

(Question 1) As we move downward along demand curve, demand becomes more Inelastic.

(2-4) Option (3)

Point Price elasticity (Ep) = % Change in quantity demanded / % Change in price

Ep, Citrus Attack = [$(1.2 - 1.4) / $1.4] / [(12,000 - 10,000) / 10,000] = (- 0.2 / 1.4) / (2,000 / 10,000) = - 0.71

Ep, Roll Colla = [$(0.8 - 1) / $1] / [(1,000 - 500) / 500] = (- 0.2 / 1) / (500 /500) = - 0.2

Since absolute value of both elasticities is less than 1, both goods have inelastic demand.

(Question 3) Option (4)

None of the values is correct.

(Question 4) Option (5)

None of the values is correct.

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