Refer to the graph above. Between prices p_1 and p_2, which demand curve is relatively most elastic?

• A. Demand curve A
• B. Demand curve C
• C. Demand curve B

Answer: (A)

Verified step by step guidance

1. Recall that price elasticity of demand measures how much the quantity demanded responds to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
2. Understand that the elasticity of a demand curve depends on its slope and the price-quantity combination. A flatter demand curve indicates higher elasticity because quantity demanded changes more for a given price change.
3. Between two prices, \(p_1\) and \(p_2\), compare the slopes of the demand curves A, B, and C. The demand curve with the smallest absolute slope (flattest) between these prices is the most elastic.
4. Alternatively, if the graph provides quantities at \(p_1\) and \(p_2\) for each demand curve, calculate the percentage changes in quantity and price for each curve using the midpoint formula for elasticity: \[\text{Elasticity} = \frac{\frac{Q_2 - Q_1}{(Q_1 + Q_2)/2}}{\frac{p_2 - p_1}{(p_1 + p_2)/2}}\]
5. Compare the calculated elasticities for demand curves A, B, and C. The curve with the highest elasticity value (in absolute terms) between \(p_1\) and \(p_2\) is the relatively most elastic demand curve.