Elasticity is a simple concept. And the equation is simple too. As it is simple, you should not lose points! Here we would like to point out that:

Elasticity ≠ 1/slope of the demand/supply curve

It is easy for the candidates to take it for granted that elasticity is just 1/slope of the curve. But it is NOT! It is related to the slope of the curve but it is NOT 1/ slope of the curve. Why? Just because the definition of elasticity is simply not 1/slope!

       Elasticity   = % change of Q / % change of P

= (DQ/Q)/(DP/P)

= DQ/DP x P/Q

= (1/slope) x P/Q

So, elasticity is inversely proportional to the slope but also modulated by P/Q. Of course, it is still true that when the slope is 0 (horizontal), the elasticity is infinity (perfectly elastic, 1/0 = infinity) and when the slope is infinity (vertical), the elasticity is zero (perfectly inelastic, 1/infinity).

Ok, so why this is important?

Let’s look at this example. If the demand curve is a straight line, are the elasticities at Q= 100 the same as that at Q =200?

They are not the same even the curve is a straight line! This is because, although a straight line has constant slope (thus constant 1/slope), P/Q is not constant and therefore the elasticities are not the same! Indeed, since P/Q is larger at smaller Q and smaller at larger Q, therefore, the elasticity at Q=100 is larger than that at Q=200!

Think: How would the elasticity change when Q increases along a supply curve?