Unformatted text preview: axis. Demand is completely inelastic at the intercept on the quantity axis. Demand is unit elastic at the halfway point between these two extremes. Thus, a. The price elasticity of demand equals zero (is completely inelastic) at a price of zero. b. Demand is infinitely elastic at a price of $60. c. The price elasticity of demand equals one at a price of $30. d. The price elasticity of demand equals P Q Q P ∆ ∆ . If P equals $40, Q equals 80. Q P ∆ ∆ is constant along a linear demand curve. In this case it equals 4. Therefore, the price elasticity of demand equals (40/80)(4) = 2....
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This note was uploaded on 09/05/2008 for the course ECON 302 taught by Professor Toossi during the Fall '08 term at University of Illinois at Urbana–Champaign.
 Fall '08
 TOOSSI
 Price Elasticity

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