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Author Question: Explain why the price elasticity of demand changes along a linear demand curve. What will be an ... (Read 88 times)

SGallaher96

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on: Jul 1, 2018
Explain why the price elasticity of demand changes along a linear demand curve.
 
  What will be an ideal response?

Question 2

Explain why when the demand curve for a good is elastic, a one percent reduction in the price of the good will increase a consumer's expenditure on the good.
 
  What will be an ideal response?
Microeconomics ¦ Perloff ¦ 8th Edition
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epscape

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Reply #1 on: Jul 1, 2018
Answer to Question 1

The price elasticity of demand depends on BOTH the slope of the demand curve and on the term P/Q which changes as you move along the demand curve.

Answer to Question 2

When a good has an elastic demand, a one percent decrease in the price will result in a greater than one percent increase in the quantity demanded. Thus, the price multiplied by the quantity will increase when the price declines by one percent.


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