Question

Observe the following figure and answer the questions given lowing below it:

Identify and explain the degree of elasticity of demand in the figure.

Answer 1

Degree of Elasticity: Relatively Elastic Demand

Explanation:

In the figure, a small fall in price from P to P₁ leads to a comparatively large increase in quantity demanded from Q to Q₁.
This shows that quantity demanded is highly responsive to changes in price.
Therefore, the demand is relatively elastic (Ed > 1).