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Homework answers / question archive / Using the graph provided, which one of the below statements is TRUE A
Using the graph provided, which one of the below statements is TRUE A. When moving from point B to point there is relative elasticity of demand B. When going from point B to point A there is relative elasticity of supply C. Point A is more likely to be the producer price point than point B or C D. Point B is more likely to be the producer price point than point A or C E. Point C is more likely to be the producer price point than point A or B F. The graph diplays perfect elasticity of demand G. The graph displays perfect inelasticity Elasticity $12,000 A Price = $9750 Units = 50 $10,000 $8,000 B Price = $6000 Units = 120 $6,000 $4,000 ? Price = $2000 Units = 200 $2,000 Price ($) SO 0 50 Units 100 150 200 250
Elasticity between point B is C is caculated using %change in quantity demanded / %change in price where %change in price = [(200 - 120) / 120] * 100 = 66.67% while %change in quantity demanded = [(2,000 - 6,000) / 6,000] * 100 = -66.67. Thus, elasticity of demand between B and C is 1 which shows unitary elasticity of demand. Thus, option A is incorrect.
Option B is incorrect because it is the demand curve which shows elasticity of demand not elasticity of supply.
Option C is incorrect as it tends to be extreme price which a producer charge. They will charge a price somewhere between middle of demand curve.
Option D is correct.
Option E is incorrect as it tends to be extreme price which a producer charge. They will charge a price somewhere between middle of demand curve.
Option F is incorrect as perfectly elastic demand curve is horizontal not downward sloping.
Option G is incorrect as perfectly inelastic demand curve is vertical not downward sloping.
