Steep Demand    Consider a price change from 8 to 12, with a quantity change from 2 to 1. The price change is +50% (increase of 4, which is 50% of 8) and a quantity change of -50% (drop in quantity of 1, which is 50% of 2), giving us = 1.

   This is very different from what we found before, so it can't just be slope that determines elasticity. We will find it useful to use steeper curves to represent more inelastic demand, and flatter curves to represent elastic demand; just remember that slope and elasticity aren't the same.

   Suppose we use the same amount of change, but reverse the direction to a price drop from 12 to 8, and a quantity increase from 1 to 2. This means that the percentage change in price is -33%, while the percentage change in quantity is + 100%. Suddenly we have an elasticity of 3 because we changed the order of the numbers!

Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved