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Chapter 5: Q.3 (page 129)

Why is the demand curve with constant unitary elasticity concave?

Short Answer

Expert verified

Because price decreases do not have the same absolute worth.

Step by step solution

01

Definition

Demand curve:

The demand curve will be a graph that depicts the link between the worth of a commodity or service and also the quantity demanded overtime. the value will display on the left vertical axis, and therefore the amount needed on the horizontal axis, in an exceedingly typical representation.

02

Explanation

Because the absolute value of price reductions is not equal, the demand curve with constant unitary elasticity is concave. The left side of the curve begins with high pricing, and as it descends toward the right side, prices reduce by decreasing amounts. This creates a curved, concave shape with a steeper demand slope on the left and a flatter demand slope on the right.

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Most popular questions from this chapter

What is the formula for the income elasticity of demand?

Suppose you could buy shoes one at a time, rather than in pairs. What do you predict the cross-price elasticity for left shoes and right shoes would be?

Suppose you are in charge of sales at a pharmaceutical company, and your firm has a new drug that causes bald men to grow hair. Assume that the company wants to earn as much revenue as possible from this drug. If the elasticity of demand for your company’s product at the current price is 1.4, would you advise the company to raise the price, lower the price, or keep the price the same? What if the elasticity were 0.6? What if it were 1? Explain your answer.

Describe the general appearance of a demand or a supply curve with zero elasticity.

What is the formula for the cross-price elasticity of demand?
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