Topic02%28b%29_Elasticity

# At the center of a liner line e dqdp pq 2 24 1 e dqdp

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At the center of a liner line, E = dQ/dP * P/Q = 2* (2/4) = 1 E = dQ/dP * P/Q = - 2* (2/4) = - 1 At P = 0 and Q = 8, E = - 2 * 0/8 = 0. Demand is completely inelastic A this point Demand is completely inelastic. A this point the consumer has already consumed the maximum possible. So at this point, the consumer will not buy any extra for an infinitesimal change in P. 10

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C ti El ti it Computing Elasticity Elasticity may be computed for a change Elasticity may be computed for a change from one point on the D curve to another point on the same curve ( Arc Elasticity ). Price Elasticity % Q = = (Q 2 – Q 1 )/Q 1 of Demand, E D % P (P 2 – P 1 )/P 1 Another approach is to divide the change Another approach is to divide the change by the average of two points—(Q 1 + Q 2 )/2 instead of Q 1 and (P 1 + P 2 )/2 instead of P 1 . 11