question archive True or false: For the following statement give reason for your answer: For a linear demand P=a - bq, the absolute value of the elasticity of demand decreases as price decreases or output increases

True or false: For the following statement give reason for your answer: For a linear demand P=a - bq, the absolute value of the elasticity of demand decreases as price decreases or output increases

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True or false: For the following statement give reason for your answer:

For a linear demand P=a - bq, the absolute value of the elasticity of demand decreases as price decreases or output increases.

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True. We know that [Math Processing Error]ED=percentagechangeinQ/percentagechangeinP

We can also rewrite that as: [Math Processing Error]ED=(1/slope)∗(P/Q)

Therefore, absolute value of elasticity decreases as price decreases or as output increases.

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