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

Info icon This preview shows pages 10–19. Sign up to view the full content.

View Full Document Right Arrow Icon
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
Image of page 10

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
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
Image of page 11