A linear demand curve:
A) has a constant price elasticity of demand.
B) has price elasticity of demand equal to one.
C) has price elasticity of demand that is positive.
D) can have both elastic and inelastic price elasticity of demand.

Question

Quizplus · Accepted Answer

A linear demand curve does not have a constant price elasticity of demand; instead, the elasticity varies along the curve. At high prices and low quantities, the demand is elastic (a small change in price leads to a large change in quantity demanded), and at low prices and high quantities, the demand is inelastic (a small change in price leads to a small change in quantity demanded). Therefore, a linear demand curve can exhibit both elastic and inelastic price elasticity of demand, depending on the specific price and quantity point being considered.

A Linear Demand Curve