Elasticity on a Linear Demand Curve (2009 – 13.b)

One more time, the price elasticity of demand is:

percentage change of demand/ percentage change of price

The main points here are:

1)    It is measured as percentages, NOT the slopes

2)    Demand curve is plotting price against demand (price decreases when demand increases)

So, for a liner demand curve, when the price is high, it is very elastic (because percentage change of demand is large for a given percentage change of price)

When the price is low, it is inelastic!

This makes sense, right? When the price is low already, demand won’t change much as the price changes.