Price Elasticity Varies Along a Linear Demand Curve

Steps:

• Identify the demand curve as linear and downward-sloping, typical in such diagrams.
• Apply the price elasticity formula: PED = (% change in quantity demanded) / (% change in price).
• Note that for linear curves, PED exceeds 1 above the midpoint (elastic), equals 1 at midpoint, and is below 1 below (inelastic).
• Conclude PED changes continuously with price and quantity.

Why C is correct:

• PED differs at every price on a linear demand curve because the formula PED = (dQ/dP) * (P/Q) varies as P and Q change along the curve.

Why the others are wrong:

• A: Expenditure rises with falling price only if elastic; it falls if inelastic, per total revenue = P * Q.
• B: Linear demand is more elastic at higher prices (larger %ΔQ for %ΔP) than at lower prices.
• D: PED equals one only at the midpoint where MR=0, not at every price.

Final answer: C