The following graph depicts demand.
Refer to the figure above.The price elasticity of demand at point D is:
A) 5/2.
B) 1/2.
C) 2/5.
D) 2.

Question

The following graph depicts demand. 
Refer to the figure above.The price elasticity of demand at point D is:
A) 5/2. 
B) 1/2. 
C) 2/5. 
D) 2.

Quizplus · Accepted Answer

The price elasticity of demand at any point on a linear demand curve can be calculated as the ratio of the percentage change in quantity demanded to the percentage change in price. At point D, the price is $8 and the quantity demanded is 20. Moving vertically up to point E shows that the quantity demanded decreases to 16, which is a decrease of 20%. Moving horizontally to point C shows that the price increases to $10, which is an increase of 25%. Therefore, the price elasticity of demand at point D is (20%/25%) = 0.8, or 2/5.

The Following Graph Depicts Demand