If a demand curve is linear, does that mean its elasticity is constant? Why or why not?...

If a demand curve is linear, does that mean its elasticity is constant? Why or why not?
If the price is increased on an item, does that mean more revenue will be collected? Why or why not?
Describe Active Learning 2.
What is the price sensitivity of supply and how is it calculated using the midpoint method?
What is the connection between the slope of the supply curve and its elasticity?
What are the five classifications of supply curves and distinguish between them?
For many goods, price elasticity of supply is greater when? Why?
Describe Active Learning 3.
A typical supply curve would gradually get more upward sloping. Why is this and what does it tell us about the price elasticity of supply?
Describe an example of an elasticity that is not price-related.

Expert Solution

1) On a linear demand curve the elasticity is not constant. This is because the demand curve representative of the Marginal benefit obtained from the increase in consumption of the good. Because of the dimnishing Marginal utility or benefit obtained from consumption of every subsequent unit. When we are on thee upper part of the demand curve we are consuming only few units of the good. Thus the Marginal benefit is less and therefore the percentage change in quantity for percentage change in price and that is why the demand curve is inelastic. While on the lower portion of the demand curve because the consumer is already consuming too many units, this imply that Marginal benefit from any subsequent consumption will be less and that is why the percentage change in quantity demanded for any percentage change in price is high. This imply that the demand curve is more elastic.

2) No. Increase in price doesn't mean that the revenue will increase. This depends on whether we are on the lower portion of the upper portion of the demand curve. If we are on the upper part of the demand curve where the demand curve is less elastic and therefore the price increase doesn't change quantity demanded too much, the total revenue will increase in increase in price while on the lower portion where the demand curve is elastic, the total revenue will fall when price is increased.

Hi. Please try to post each question separately. Thank you!

Rahul Sunny answered 1 hour ago

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