09-23-2008, 06:39 PM
To me it makes more sense to say, "Price elasticity is constant along a straight-line demand curve when that curve is perfectly inelastic or perfectly elastic. Aside from these two examples, describe another demand curve where price elasticity is constant at a value between zero and infinity."
In other words, price elasticity will remain constant when demand stays the same regardless of price (perfect demand inelasticity) or demand will change by the exact same percentage as a change in price (perfect demand elasticity).
To answer the question, one could describe a demand curve where every five percent change in demand yielded a four percent change in price. For example, if the demand for a $10.00 widget goes up 5%, the price goes up 40 cents (4%). If demand falls by 5%, the price drops by 4%.
In other words, price elasticity will remain constant when demand stays the same regardless of price (perfect demand inelasticity) or demand will change by the exact same percentage as a change in price (perfect demand elasticity).
To answer the question, one could describe a demand curve where every five percent change in demand yielded a four percent change in price. For example, if the demand for a $10.00 widget goes up 5%, the price goes up 40 cents (4%). If demand falls by 5%, the price drops by 4%.