Individual and market demand - Price elasticity of demand
5 important questions on Individual and market demand - Price elasticity of demand
The three categories of price elasticity are:
- inelastic: if the price elasticity exceeds -1
- unit elastic: if its price elasticity is equal to -1
Another way to calculate the price elasticity is the point-slope method, which makes it apparent that elasticity will be inversely related to the slope of the demand curve. Algebraically, this is:
Two polar cases of demand elasticity are when the price elasticity of the demand curve is equal to -infinity, or when the price elasticity is equal to zero at every point. Such demand curved are said to be:
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When the market demand curve is linear, price elasticity is different at every point alone the demand curve. Suppose we divide the demand curve into two segments AC and CE, the price elasticity at point C will then be equal to the ratio of the two segments: E = CE/AC. This method is called:
Since the slope of a demand curve is much simpler to calculate than its elasticity, why bother with elasticity at all? Name one reason.
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