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JAMB Economics 2007 Question 22

Question 22

Elasticity

When a firm's average revenue curve is downward-sloping, its price elasticity of demand will be

  1. A.one
  2. B.between zero and infinity
  3. C.greater than one
  4. D.zero
Show the answer and explanation

Answer: B (between zero and infinity)

Explanation

Along a downward-sloping straight demand (AR) curve, elasticity changes from very large at the top to zero at the bottom, so it lies between zero and infinity.