Practice question · Multiple choice
A linear demand curve has a constant slope, yet demand is elastic on its upper half and inelastic on its lower half. How can elasticity change when the slope does not?
Hints
- Write the elasticity formula and note which terms are not the slope.
- A €1 rise on a €2 item and on a €200 item are the same absolute change.
Show the answer
D. Because elasticity is a ratio of percentage changes
Why
Slope is absolute and elasticity is relative. The factor sweeps from large to small along the curve, which is why total revenue peaks exactly at the midpoint.
Practise Demand and Elasticity
The app has 6 more questions on this lesson, and keeps your place in the course. Business I is free to start.
More questions on Demand and Elasticity
- If εp = -0.5 and price rises 20%, quantity falls by:
- A firm facing elastic demand can increase revenue by raising its price.
- Order the logic of deriving a demand curve.
- Match each elasticity type to its formula.
- Sort by cross-price elasticity sign.
- A rail operator raises fares and its revenue falls. What does that reveal about the elasticity it faces, and…