Question

How does elasticity change as prices increase?

Answer 1

Elasticity will change with an increase in its price.

Explanation:

Price : Quantity
15 : 1
10 : 5
5 : 10

When the price increases from $.5 to $.10, the quantity demanded decreases from 10 units to 5 units.

Elasticity in this segment is =`(% Delta QD )/(% Delta P) = (50%)/(100%)` = 0.5 < 1

When the price increases from $.10 to $.15, the quantity demanded decreases from 5 units to 1 unit.

Elasticity in this segment is =`(% Delta QD )/(% Delta P) = (80%)/(50%)` = 1.6 > 1