Question

A straight-line downward-sloping demand curve has a price elasticity of demand that decreases as price decreases...

A straight-line downward-sloping demand curve has a price elasticity of demand that

decreases as price decreases

increases as price decreases

is zero at all prices

is unitary at all prices
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Answer #1

Answer to the question:

Option a: Decreases as price decreases.

Explanation: The formula to find the point elasticity of demand is:

Here LS= Lower segment and US= Upper Segment.

Refer to the following diagram:

The red curve is the demand curve. As the price decreases, the quantity increases. And we move down along the demand curve. That will cause the value of the upper segmet to rise and the lower segment to decline, causes the elasticity of demand to fall.

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