Question

PLEASE ANALYZE THE GPRAH CAREFULLY! USE THE MIDPOINT FORMULA TO BE SURE THAT YOU SELECTED THE CORRECT ANSWER! WRITING MUST BE CLEAR TO READ!!! IF YOU ARE UNABLE TO USE THIS FORMULA USE SOMETHING THAT WOULD TELL YOU THE CORRECT ANSWER!

MIDPOINT FORMULA: (Q2-Q1/Q2+Q1)/2 divided by (P2-P1/P2+P1)/2

4. The variety of demand curves The following graph displays four demand curves (LL, MM, NN, and O0) that intersect at point A. 100 90 DIE 50 1 30 冰》 0 0 20 30 4050 0 70 80 0 100 QUANTITY (Units)

Answer 1

Use a simple trick, you wont need a formula or such simple question. The flatter the curve is the more elastic it is. i.e. a horizontal curve is perfectly elastic and a vertical curve is perfectly inelastic.

If a curve is more towards the flatter side it is elastic as compared to other curves. If a curve is closer to the vertical curves it is inelastic. A 45* line is considered as a unit elastic i.e.where the elasticity is 1.

a) AD is more closer to the vertical curve as compared to AC, therefore AD is less elastic compared to AC. The statement is true.

b) The curve AD is more on the vertical side when compared to a imaginary 45* line. So it will be inelastic. The statement is false.

c) The statement is true. A horizontal curve is always perfectly elastic.