Answer to Question #255391 in Microeconomics for ody

Question

using the graph expalin why elasticity of demand will be greater bewteen 15 and $9 opposed tombewtween $9 and $4. prove this is true

Answer 1

Price elasticity of demand: The price elasticity of demand is the measurement of the change in the quantity demanded of a commodity because of the change in the price of the commodity. The price and the quantity demanded of a commodity have an inverse relationship that means when the price of the commodity rises the quantity demanded of the commodity tends to falls and vice versa.

As the law of demand suggests that "Ceteris paribus (other things remain constant) there exists an inverse relationship between the price and quantity demanded of a commodity i.e when the price of the commodity rises the quantity demanded of the commodity tends to fall and vice versa"

"Ceteris paribus (other things remain constant) there exists an inverse relationship between the price and quantity demanded of a commodity i.e when the price of the commodity rises the quantity demanded of the commodity tends to fall and vice versa".

When the prices are falling from $15 to $9 the percentage change in the price are calculated below;

$Percentage\space change\space in \space prices=\frac{New\space price-Old\space price}{Old\ price}\times 100$

$=\frac{9-15}{15}\times100$

$=40\%$

Whereas When the prices are falling from $9 to $4, the percentage change in the price are calculated below;

$Percentage\space change\space in \space prices=\frac{New\space price-Old\space price}{Old\ price}\times 100$

$=\frac{4-15}{15}\times100$

$=33.3\%$

Since the percentage change in price is more when the prices are falling from $15 to $9, we can conclude that when the prices are falling from $15 to $9 the elasticity of demand will be greater.

Graphical presentation

Following below is the graphical presentation of them same;

The steeper the curve will be the greater the elasticity of demand will be. Thus we can conclude that elasticity of demand will be greater between $15 and $9.