On a straight-line downward-sloping demand curve, moving toward the vertical intercept causes elasticity to

On a straight-line downward-sloping demand curve, moving toward the vertical intercept causes elasticity to

• A. Decrease
• B. Stay the same
• C. Become zero
• D. Increase

Answer: (D)

Elasticity of demand measures how much quantity demanded responds to a price change. On a straight-line downward-sloping demand curve, the slope is constant, but elasticity varies along the curve because elasticity depends on the ratio of price to quantity (ε = (P/Q) · dQ/dP). For a linear demand, as you move toward the vertical intercept, price rises while quantity falls toward zero, so the ratio P/Q grows. That makes the elasticity magnitude larger, so demand becomes more elastic. Near the intercept, a small price change causes a large percentage change in quantity; near the origin, price is low and quantity is high, giving a small elasticity. Therefore, elasticity increases as you move toward the vertical intercept.

Elasticity of demand measures how much quantity demanded responds to a price change. On a straight-line downward-sloping demand curve, the slope is constant, but elasticity varies along the curve because elasticity depends on the ratio of price to quantity (ε = (P/Q) · dQ/dP). For a linear demand, as you move toward the vertical intercept, price rises while quantity falls toward zero, so the ratio P/Q grows. That makes the elasticity magnitude larger, so demand becomes more elastic. Near the intercept, a small price change causes a large percentage change in quantity; near the origin, price is low and quantity is high, giving a small elasticity. Therefore, elasticity increases as you move toward the vertical intercept.