When one moves upward from right to left on a negatively sloped straight line demand curve, then the value of price elasticity of demand:

Question

Accepted Answer

The correct option is 2:

When one moves upward from right to left on a negatively sloped straight line demand curve, then the value of price elasticity of demand **increases**. This is a fundamental concept in demand theory. The formula for price elasticity of demand (E$\_d$) is: E$\_d$ = (P/Q) \* (1/slope), where P is Price, Q is Quantity, and (1/slope) is the constant reciprocal of the slope for a straight-line demand curve. Although the slope is constant on a straight line, the ratio of Price (P) to Quantity (Q) changes continuously. As we move upward and leftward along the curve, we move towards higher price levels (P) and lower quantity levels (Q). Therefore, the ratio P/Q continuously increases. Since the P/Q ratio is directly proportional to E$\_d$, the elasticity value must continuously increase as we move up the demand curve, ranging from zero at the quantity-axis intercept (P/Q = 0) to infinity at the price-axis intercept (Q/P = 0).

The incorrect option is 1:
The elasticity of demand **remains constant** only if the demand curve is a rectangular hyperbola, which is not the case here as the curve is specified as a straight line. For any straight-line demand curve, the percentage change in quantity demanded in response to a percentage change in price varies at every single point because the base price and base quantity change constantly. Therefore, elasticity cannot remain constant along a straight-line curve. This option would only be correct if the demand curve represented perfectly elastic or perfectly inelastic demand (horizontal or vertical line) or unit elasticity (rectangular hyperbola).

The incorrect option is 3:
The elasticity of demand **decreases** when moving downward and to the right along a straight-line demand curve, not upward and to the left. Moving downward means the P/Q ratio is decreasing (Price is low, Quantity is high). Therefore, stating that elasticity decreases when moving upward (towards high P and low Q) is incorrect, as the P/Q ratio is clearly rising, leading to an increasing elasticity value.

The incorrect option is 4:
The elasticity of demand does not **first increase and then decrease** along a negatively sloped straight-line demand curve. Elasticity changes continuously and monotonically (in one direction) along such a curve. It increases consistently as you move from the right intercept (E$\_d$=0) toward the left intercept (E$\_d$=∞). The increase is smooth and continuous, not reversible, making this option conceptually flawed for a straight-line curve.