I could not respond to the post without authorization, so here's my answer!
The angle that is formed by the line of Demand and the line that indicates price A will be 90 degrees for a perfectly inelastic demand (vertical line) and would be 0 degrees for a perfectly inelastic demand (horizontal line). Therefore, I think, if the angle being formed between price line A and Demand is smaller than 45 degrees, the demand is elastic. If the angle is bigger than 45 degrees, the demand is inelastic.
Demand 1 is inelastic. The angle formed between line A and Demand 1 is bigger than 45 degrees, as line AC is bigger than line Q1Q2. Because the angle is bigger than 45 degrees, Demand 1 is inelastic.
Demand 2 is elastic, for sure. The angle formed between line A and Demand 2 is smaller than 45 degrees, as line AB is smaller than line Q1Q2. Because the angle is smaller than 45 degrees, Demand 2 is elastic.
Therefore it's true!
This is a mathematical explanation to this question I came up with.. I hope it makes sense!
It's false...but why?
ReplyDeleteI honestly wouldn't know! The only thing I could come up with is the fact that you don't know anything about the scale of the axis, and therefore can't make that statement! This would mean it's false.
ReplyDeleteBut I'm guessing that's even more wrong than my first answer, so please explain the real answer to me! :)
The price elasticity of demand decreases as you move down a straight-line demand ‘curve’, so you can only compare elasticity at particular points on the two curves or over particular segments.
ReplyDeleteOkay that's not the way I looked at this exercise. Maybe I should start thinking outside the box.. It does make sense though. Thanks for the explanation.
ReplyDeleteFalse
ReplyDelete