Question

. What is the relationship between price elasticity and position on the demand curve? For example, as you move up the demand curve to higher prices and lower quantities, what happens to the measured elasticity? How would you explain that?

Answer 1

At point R, Elasticity = 1 as the percentage change in QD=Percentage change in price

In the upper segment,price elasticity is greater than 1, as an increase in price will cause the quantity demanded to change by a greater percentage.At point P,the elasticity will be equal to infinity.

In the lower segment, price elasticity is less than 1 as the percentage change in quantity will be lower than the percentage change in price. At point Q, the elasticity will be equal to 0.