Question 1

Why does elasticity change along a linear demand curve?

Accepted Answer

Although a linear demand curve has a constant slope, elasticity varies because it depends on the price-to-quantity ratio, not just slope. At the vertical intercept, quantity is zero, creating infinite elasticity. As you move down the curve, price decreases and quantity increases, reducing the P/Q ratio and lowering elasticity. This means consumer responsiveness to price changes differs at each point on the same straight line.

Question 2

What characterizes the elastic demand zone on a linear demand curve?

Accepted Answer

The elastic demand zone extends from the vertical intercept to the midpoint, where elasticity exceeds one. Here, the percentage change in quantity demanded is greater than the percentage change in price. This region represents high consumer sensitivity to price changes, typical for goods with close substitutes. Consumers readily adjust consumption based on price movements in this zone.

Question 3

What does unitary elastic demand mean at the midpoint?

Accepted Answer

At the midpoint of a linear demand curve, elasticity equals exactly one, indicating unitary elastic demand. This represents a balanced relationship where the percentage change in price equals the percentage change in quantity demanded. The midpoint marks the transition between elastic and inelastic regions, showing proportionate responsiveness to price changes.

Question 4

How does the inelastic demand zone differ from the elastic zone?

Accepted Answer

Beyond the midpoint toward the horizontal intercept, demand becomes inelastic with elasticity less than one. Here, the percentage change in price exceeds the percentage change in quantity demanded, indicating low consumer sensitivity to price changes. This zone typically includes necessities and luxuries with fewer substitutes, where consumers maintain relatively stable consumption despite price fluctuations.

Question 5

What happens to elasticity at the vertical and horizontal intercepts?

Accepted Answer

At the vertical intercept, quantity demanded is zero, creating a division-by-zero condition that makes elasticity theoretically infinite, representing perfectly elastic demand. Conversely, at the horizontal intercept where price approaches zero, elasticity approaches zero, indicating perfectly inelastic demand. These boundary conditions represent theoretical extremes where consumers show maximum and minimum responsiveness to price changes.

Question 6

How is price elasticity of demand calculated on a linear demand curve?

Accepted Answer

Price elasticity of demand is calculated as the change in quantity demanded divided by the change in price, multiplied by the ratio of price to quantity. On a linear demand curve, the slope (delta P over delta Q) remains constant, but the P/Q ratio varies at each point. This formula reveals why elasticity changes along the curve despite its constant slope.

Question 7

Why is consumer sensitivity to price changes not uniform across a linear demand curve?

Accepted Answer

Consumer sensitivity varies because elasticity depends on both the slope and the price-to-quantity ratio. While the slope is constant on a linear curve, the P/Q ratio decreases as you move down the curve. This means the same price change produces different percentage changes in quantity at different points, creating varying degrees of elasticity and reflecting different levels of demand responsiveness throughout the curve.

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