Authors libby rittenberg 234

Finding the price elasticity of demand requires that we first compute
percentage changes in price and in quantity demanded. We calculate those
changes between two points on a demand curve.
Figure 5.1 "Responsiveness and Demand" shows a particular demand
curve, a linear demand curve for public transit rides. Suppose the initial
price is $0.80, and the quantity demanded is 40,000 rides per day; we are
at point A on the curve. Now suppose the price falls to $0.70, and we want
to report the responsiveness of the quantity demanded. We see that at the
new price, the quantity demanded rises to 60,000 rides per day (point B).
To compute the elasticity, we need to compute the percentage changes in
price and in quantity demanded between points A and B.
Figure 5.1 Responsiveness and Demand

The demand curve shows how changes in price lead to changes in the
quantity demanded. A movement from point A to point B shows that a
$0.10 reduction in price increases the number of rides per day by
20,000. A movement from B to A is a $0.10 increase in price, which
reduces quantity demanded by 20,000 rides per day.
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org

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