Figure 7-4
Which of the following is true for the demand curve depicted in Figure 7-4?
A) An increase in price from $2 to $3 will reduce total expenditures on the product.
B) In the $2 to $3 range, the price elasticity of the demand curve is approximately unitary.
C) At a price of $2, the price elasticity of the demand curve equals approximately − 2.5.
D) In the $2 to $3 range, the demand curve is inelastic.

Question

Figure 7-4 
Which of the following is true for the demand curve depicted in Figure 7-4?
A) An increase in price from $2 to $3 will reduce total expenditures on the product. 
B) In the $2 to $3 range, the price elasticity of the demand curve is approximately unitary. 
C) At a price of $2, the price elasticity of the demand curve equals approximately − 2.5. 
D) In the $2 to $3 range, the demand curve is inelastic.

Quizplus · Accepted Answer

In the $2 to $3 range, the demand curve is relatively steep, indicating a less than proportionate change in quantity demanded as price changes. Therefore, the demand curve is inelastic. Option A is incorrect because a price increase from $2 to $3 will increase total expenditures on the product because quantity demanded will not decrease enough to offset the increase in price. Option B is incorrect because between $2 and $3, the price elasticity of demand is less than 1, indicating inelastic demand. Option C is incorrect because the slope of the demand curve is not equal to price elasticity, and the given figure does not provide enough information to calculate price elasticity at a specific point.

Figure 7-4 Which of the Following Is True for the Demand Curve