The above figure shows three demand curves labeled D1, D2, and D3. Ran

The above figure shows three demand curves labeled D1, D2, and D3. Rank these three demand curves in terms of elasticity at a price of c.

What will be an ideal response?

ANSWER

First, compare D1 to D2.
Moving from price a to price c, dQ/dp = Q/(c – a).
Elasticity equals Q/(c – a) ∗ (c/Q) = c/(c – a) for both D1 and D2.
To compare D2 with D3, consider that they have the same slope; call it b.
Then E1 = bc/Q1 and E3 = bc/Q3. Since Q3 > Q1, D1 is more elastic.
Thus, E1 = E2 > E3 (in absolute terms).