A downward-sloping straight-line demand curve will have a a. higher price elasticity of demand coefficient along the top of the demand curve. b. lower price elasticity coefficient along the top of the demand curve. c. constant price elasticity of demand coefficient throughout the length of the demand curve. d. positive slope.

Short Answer

Expert verified
The correct answer is (a) - A downward-sloping straight-line demand curve will have a higher price elasticity of demand coefficient along the top of the demand curve. This is because consumers are more responsive to price changes when the price is high.

Step by step solution

01

Review of Price Elasticity of Demand

Price elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
02

Understanding Downward-Sloping Straight-Line Demand Curve

A downward-sloping straight-line demand curve indicates a negative relationship between price and quantity demanded, meaning as the price of a good decreases, consumers demand more of it.
03

Price Elasticity Along the Demand Curve

Price elasticity of demand varies along this straight-line demand curve. It is more elastic (higher price elasticity) when the price is high (top of the demand curve), meaning consumers are more responsive to price changes. As we move down the demand curve and the price decreases, the price elasticity of demand becomes less elastic (lower price elasticity), meaning consumers are less responsive to price changes. Now, let's analyze the given options. a. higher price elasticity of demand coefficient along the top of the demand curve. As we discussed, the price elasticity of demand is higher (more elastic) at the top of the downward-sloping straight-line demand curve. So, this statement is true. b. lower price elasticity coefficient along the top of the demand curve. This statement is the opposite of the correct one, so it is false. c. constant price elasticity of demand coefficient throughout the length of the demand curve. The price elasticity of demand is not constant along the straight-line demand curve, as we discussed. So, this statement is false. d. positive slope. The downward-sloping straight-line demand curve indicates a negative relationship between price and quantity demanded, so it has a negative slope, not a positive one. This statement is false.
04

Conclusion

Among the given options, only option (a) is true. A downward-sloping straight-line demand curve will have a higher price elasticity of demand coefficient along the top of the demand curve.

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