A straight-line downward-sloping demand curve has a price elasticity of demand that:

	Definition: The price elasticity in demand is defined as the percentage change in quantity demanded divided by the percentage change in price. Since the demand curve is normally downward sloping, the price elasticity of demand is usually a negative number. However, the negative sign is often omitted. Context: In principle, the price elasticity may vary from (minus) infinity to zero. The closer to infinity, the more elastic is demand; and the closer to zero, the more inelastic is demand. In practice, elasticities tend to cluster in the range of minus 10 to zero. Minus one is usually taken as a critical cut-off point with lower values (that is less than one) being inelastic and higher values (that is greater than one) being elastic. If demand is inelastic a price increase will increase total revenues while if demand is elastic, a price increase will decrease revenues. Demand curves are defined for both the industry and the firm. At the industry level, the demand curve is almost always downward sloping. However, at the firm level the demand curve may be downward sloping or horizontal. The latter is the case of the firm in a perfectly competitive industry whose demand is infinitely elastic. When the firm�s demand curve is downward sloping, the firm has some control over its price. Inhaltsverzeichnis Show When the demand curve is a downward sloping straight line? What is the elasticity of demand if the demand curve is a straight line downward sloping at mid point? When the demand curve is a straight vertical line the price elasticity of demand is? When a demand curve is linear and downward sloping? The price elasticity of demand is determined by a number of factors, including the degree to which substitute products exist (see cross price elasticity of demand). When there are few substitutes, demand tends to be inelastic. Thus, firms have some power over price. When there are many substitutes, demand tends to be elastic and firms have limited control over price. Source Publication: Glossary of Industrial Organisation Economics and Competition Law, compiled by R. S. Khemani and D. M. Shapiro, commissioned by the Directorate for Financial, Fiscal and Enterprise Affairs, OECD, 1993. Statistical Theme: Financial statistics Created on Thursday, January 3, 2002 Last updated on Tuesday, March 4, 2003

1 4 2C H A P T E R 4Topic: Elasticity Along a Straight-Line DemandCurveSkill: Analytical41)A straight-line demand curve with negative slopeintersects the horizontal axis at 100 tons per week.At the midpoint on the demand curve (corre-sponding to 50 tons per week) the price elasticityof demand isThe elasticity of demand along a straight line,negatively sloped, demand curve isAnswer: CTopic: Elasticity Along a Straight-Line DemandCurveSkill: Recognition42)Which of the following statements is FALSE?Answer: BTopic: Elasticity Along a Straight-Line DemandCurveSkill: Conceptual*43)Along a straight-line demand curve, as the pricefalls theTopic: Elasticity Along a Straight-Line DemandCurveSkill: Analytical44)The price elasticity of demand ____ in valuewhen moving downward along a ___ line demandcurve.A)falls; straightB)rises; curvedC)falls, curvedD)rises; straightAnswer: ATopic: Elasticity Along a Straight-Line DemandCurveSkill: Conceptual45)The elasticity of demand along a straight line,negatively sloped, demand curve isTopic: Elasticity Along a Straight-Line DemandCurveSkill: Conceptual46)If the demand curve for a good is a downwardsloping straight line, the demand for the good willbe more price elastic the higher is theTopic: Elasticity Along a Straight-Line DemandCurveSkill: Analytical47)If the demand curve for a good is a downwardsloping straight line, then at which of the follow-ing prices is demand most elastic?A)$1/unitB)$2/unitC)$3/unitD)It is impossible to determine at which price thedemand will be most elastic without more in-formation.

When the demand curve is a downward sloping straight line?

What is the elasticity of demand if the demand curve is a straight line downward sloping at mid point?

When the demand curve is a straight vertical line the price elasticity of demand is?

When a demand curve is linear and downward sloping?