Answer to Question #323735 in Economics for Lina

Question

A student newspaper has determined that it’s coefficient of demand is less than one at prices below $1.25 but greater than one at prices above $1.25. Considering the product, why do you think elasticity changes?

Answer 1

However, along one demand curve, elasticity changes depending on the position on the demand curve. At the top end of the demand curve, an increase in price from say, 1 to 2, leads to a decrease in demand of say, 10 to 9. Although the units of change are identical, there is a 100% increase in price from 1 to 2, but a 10% decrease in demand from 10 to 9. By definition this shows inelastic demand as there only a 10% decrease in demand from a 100% increase in price.