elasticity along the demand curve

• The price elasticity of demand is constant along a linear demand curve.

  False
• The gradient of a linear demand curve is always constant
• What is the equation for price elasticity of demand?

  $\frac{\% \Delta Q_{d}}{\% \Delta P}$
• Steps to calculate percentage change in price or quantity demanded

  1️⃣ Find the difference between the new and original values

  2️⃣ Divide the difference by the original value

  3️⃣ Multiply the result by 100
• Which part of the demand curve is perfectly elastic?

  Top
• Perfectly elastic demand has an elasticity value of infinity.
• The top half of the demand curve is always the elastic
• What happens to the elasticity of demand as the price drops from 9 to 8 pounds on the demand curve?

  Becomes more elastic
• Unit elasticity has a PED value of one
• What is the percentage change in price when it drops from 5 to 4 pounds?

  -20%
• At unit elasticity, the percentage change in price equals the percentage change in quantity demanded.
• The bottom half of the demand curve is always the inelastic
• What happens to quantity demanded when price decreases from 2 to 1 pound in the inelastic section?

  Increases by 12.5%
• Perfectly inelastic demand has a PED value of zero.
• Match the PED values with their elasticity types:

  PED > 1 ↔️ Elastic demand

  PED < 1 ↔️ Inelastic demand

  PED = 1 ↔️ Unit elasticity
• To maximize total revenue, the price should be set where demand is unitary
• Steps to determine the total revenue curve

  1️⃣ Identify the midpoint of the demand curve

  2️⃣ Draw the total revenue curve maximizing at the midpoint

  3️⃣ Show the curve decreasing after the midpoint
• What happens to total revenue when price is reduced in the inelastic portion of the demand curve?

  Decreases
• The elasticity of demand is influenced by both the gradient and the specific price levels.