Chapter 6, Section 6.1, In Text Question, Exercise 01
Page 158
Does it matter whether we move up or down the demand curve when we calculate the price elasticity of demand?
Explanation
The law of demand states that quantity purchased varies inversely with price. In other words, the higher the price, the lower the quantity demanded. Choke price is an economic term used to describe the lowest price at which the quantity demanded of a good is equal to zero.
Answer
Yes it matters.
The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time. In a typical representation, the price will appear on the left vertical axis, the quantity demanded on the horizontal axis.
The demand curve will move downward from the left to the right, which expresses the law of demand — as the price of a given commodity increases, the quantity demanded decreases, all else being equal.
For instance this formulation implies that price is the independent variable, and quantity the dependent variable. In most disciplines, the independent variable appears on the horizontal or x-axis, but economics is an exception to this rule. For example, if the price of corn rises, consumers will have an incentive to buy less corn and substitute it for other foods, so the total quantity of corn consumers demand will fall.
