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Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992

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BuyFindarrow_forward

Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992
Chapter 6, Problem 3DQ
Textbook Problem
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Explain why the elasticity of a straight-line demand curve varies from one part of the curve to another.

To determine

The reason behind varying elasticity on different parts of a demand curve.

Explanation of Solution

The price elasticity of demand measures the degree of responsiveness of a change in the quantity demanded for a given change in the price level.

The formula of elasticity in mathematical expression is:

   εd=| dQ/Q dP/P |( P,Q)=| dQ dP|( P,Q)PQ

In this expression, dQ/dP is the slope of the demand curve. When the demand curve is a straight line, then the slope of the demand curve is constant.

Therefore, the factor P/Q is the variable here that decides the elasticity of a straight-line demand curve.

The following graph shows the different price elasticity of demand at different parts of the demand curve:

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