In: Economics
For a straight-line downward-sloping demand curve, price elasticity of demand
a. |
increases as we move down along the demand curve from higher to lower prices. |
|
b. |
decreases as we move down along the demand curve from higher to lower prices. |
|
c. |
remains constant along the entire demand curve. |
|
d. |
a or b depending on the actual slope of the demand curve |
Answer: b. decreases as we move down along the demand curve from higher to lower prices.
Explanation: If the demand curve is a downward sloping straight line, then the demand will be more elastic at higher prices than at lower prices. As we move along a downward sloping straight line demand curve from left to right, price elasticity of demand goes on falling.