Authors libby rittenberg 238

Figure 5.2 Price Elasticities of Demand for a Linear Demand Curve

The price elasticity of demand varies between different pairs of points
along a linear demand curve. The lower the price and the greater the
quantity demanded, the lower the absolute value of the price elasticity
of demand.
Figure 5.2 "Price Elasticities of Demand for a Linear Demand Curve" shows
the same demand curve we saw in Figure 5.1 "Responsiveness and
Demand". We have already calculated the price elasticity of demand
between points A and B; it equals −3.00. Notice, however, that when we
use the same method to compute the price elasticity of demand between
other sets of points, our answer varies. For each of the pairs of points
shown, the changes in price and quantity demanded are the same (a $0.10
decrease in price and 20,000 additional rides per day, respectively). But at
the high prices and low quantities on the upper part of the demand curve,
the percentage change in quantity is relatively large, whereas the
percentage change in price is relatively small. The absolute value of the
price elasticity of demand is thus relatively large. As we move down the
demand curve, equal changes in quantity represent smaller and smaller
percentage changes, whereas equal changes in price represent larger and
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org

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