Author Question: When comparing elasticities between two different linear demand curves, the curve that is flatter ... (Read 101 times)

vicky

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When comparing elasticities between two different linear demand curves, the curve that is flatter has greater price elasticity at every given price.
 
  Indicate whether the statement is true or false

Question 2

In the case of a linear demand curve, demand becomes more price elastic as price increases.
 
  Indicate whether the statement is true or false



Harbringer

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Answer to Question 1

False. This statement confuses slope with elasticity. Elasticity is calculated by multiplying the slope times (p/Q). As a result, the vertical intercept (along the price axis) is the key to elasticity. The curve with the lower intercept will be more price elastic at every given price.

Answer to Question 2

True . For a demand curve of the form Q = a - bp, elasticity can be written as
-bp/(a - bp). As p increases, the term in square brackets increases, making the elasticity increase.



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