Question

Problem 26

Answer 1

Introduction

Let us first understand relationship between price elasticity and position on the demand curve, a product with high price elasticity of demand (elasticity >1) will see demand fall sharply when price rise. For the product with high elasticity of demand, the downward-sloping demand curve appears flatter, and for every change in price, there is large change to the quantity demanded.

Formula to calculate demand elasticity -