Figure 5-2
-Refer to Figure 5-2.As price falls from Pa to Pb,we could use the three demand curves to calculate three different values of the price elasticity of demand.Which of the three demand curves would produce the smallest elasticity?
A)D1
B)D2
C)D3
D)All of the above are equally elastic.

Question

Figure 5-2 
-Refer to Figure 5-2.As price falls from Pa to Pb,we could use the three demand curves to calculate three different values of the price elasticity of demand.Which of the three demand curves would produce the smallest elasticity?
A)D1 
B)D2 
C)D3 
D)All of the above are equally elastic.

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. As the price falls from Pa to Pb, the quantity demanded increases along all three demand curves. However, the increase in quantity demanded is smallest along demand curve D3. This means that the percentage change in quantity demanded is smallest along demand curve D3, and therefore the price elasticity of demand is also smallest along demand curve D3.

Figure 5-2 -Refer to Figure 5-2.As Price Falls from Pa to Pb,we