Why does a demand curve with a constant slope not have a constant elasticity?
What will be an ideal response?
The slope and the elasticity of a demand curve are different but related concepts. The slope of the demand curve shows how price changes in relation to quantity. The elasticity of demand shows the percentage change in quantity demanded due to a percentage change in price. If, for example, you are consuming two units of a good, increasing consumption by one unit means that your consumption of the good increases by 50%. But if you have consumed 100 units of the good, an increase of one unit means that your consumption increases only by 1%. The slope here however, will be equal to the decrease in price divided by the increase in the number of units consumed. If the demand curve is linear the slope will be constant but the elasticity (which measures the percentage change in demand) will not be constant.
You might also like to view...
When the government implements a price support program:
A. it may end up buying a lot of the good, for which it has little or no use. B. the goal is to increase the market price of the good. C. the deadweight loss created can be larger than that created by a price floor. D. All of these occur as a result of a price support program.
The marginal revenue curve of a perfectly price-discriminating monopolist
a. coincides with the marginal cost curve b. lies below the market demand curve c. coincides with the market demand curve d. is a horizontal line through the midpoint of the market demand curve e. does not exist
Some economists believe the economy is self-regulating. What does this mean?
A) It means the economy can remove itself from recessionary and inflationary gaps and produce at Natural Real GDP. B) It means the economy is always in long-run equilibrium producing Natural Real GDP. C) It means that inflationary gaps naturally change into recessionary gaps. D) It means that recessionary gaps naturally change into inflationary gaps. E) c and d
The opportunity cost of leisure:
A. remains the same as wages get higher. B. decreases as wages get higher. C. increases as wages get higher. D. has nothing to do with wages.