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Unformatted text preview: Except for curves with an elasticity of 1, elasticity on straight-line curves is not constant. Why is this? As you move along the curve, the slope stays constant, so that each movement yields the same amount of increase or decrease. But as a curve shifts out, these increases or decreases make up a different percentage of the base amount, and the resulting percentage changes are therefore different at different points on the curve. Thus, unless elasticity is specifically stated to be constant on a curve, it usually changes from point to point, and so we usually only study the elasticity of demand or supply at a specific point (usually at the equilibrium point). Elasticity = (Change in quantity/Average quantity) / (Change in price/Average price) Elasticity = ((Q1 - Q2) / (Q1 + Q2)/2 )) / ((P1 - P2)/( (P1 + P2)/2)) This formula will give you an approximation of the elasticity over a range, instead of a...
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- Fall '11