In a given schedule, the price elasticity of demand is larger at point D than at point A.

In a given schedule, the price elasticity of demand is larger at point D than at point A.

• A. The price elasticity of demand is larger at point A than at point B.
• B. The price elasticity of demand is constant because the slope is constant.
• C. The price elasticity of demand increases moving from point A to point B to point C to point D to point E.
• D. The price elasticity of demand is larger at point D than at point A.

Answer: (D)

Price elasticity of demand measures how responsive quantity demanded is to a price change, and it can vary along a downward-sloping demand curve even if the slope is constant. The formula e = (dQ/dP) × (P/Q shows why: the slope dQ/dP is constant for a straight-line demand, but elasticity depends on the ratio of price to quantity. As you move to a point with a higher price and lower quantity, P/Q grows in magnitude, making elasticity larger. If point D sits at a higher price and lower quantity than point A, the ratio P/Q is larger at D, so the magnitude of elasticity is greater there. That’s why the statement that elasticity is larger at point D than at point A is the correct description. The other options either assume elasticity is constant (which isn’t true for a downward-sloping demand, even with a constant slope) or make a broad claim about elasticity increasing along the entire path without knowing the relative positions, which isn’t guaranteed.

Price elasticity of demand measures how responsive quantity demanded is to a price change, and it can vary along a downward-sloping demand curve even if the slope is constant. The formula e = (dQ/dP) × (P/Q shows why: the slope dQ/dP is constant for a straight-line demand, but elasticity depends on the ratio of price to quantity. As you move to a point with a higher price and lower quantity, P/Q grows in magnitude, making elasticity larger.

If point D sits at a higher price and lower quantity than point A, the ratio P/Q is larger at D, so the magnitude of elasticity is greater there. That’s why the statement that elasticity is larger at point D than at point A is the correct description.

The other options either assume elasticity is constant (which isn’t true for a downward-sloping demand, even with a constant slope) or make a broad claim about elasticity increasing along the entire path without knowing the relative positions, which isn’t guaranteed.