Measurement of price elasticity of demand
Price elasticity of demand can be measured in two major ways: Point
elasticity of demand and Arc elasticity of demand.
elasticity of demand and Arc elasticity of demand.
Point elasticity of demand is defined as the proportionate change with quantity demanded resulting from a very small proportionate change in price. It is the measure of elasticity at one point.
Arc elasticity. This is the measurement of elasticity between two points. It is a measure of average elasticity and it is given by the formula:
Price elasticity of demand and straight line demand curve. An interesting and important point is that elasticity changes from point to point along a demand curve even if the slope of that demand curve does not change.
The price elasticity of demand varies from 0 at quantity axis to infinity at the price axis. The demand is inelastic for the lower portion of the demand curve and elastic for the upper portion. It is of unitary elasticity at the mid point of the demand curve.
Price elasticity of demand and straight line demand curve.
