Authors libby rittenberg 238

Figure 5.2 Price Elasticities of Demand for a Linear Demand Curve The price elasticity of demand varies between different pairs of points along a linear demand curve The lower the price and the greater the quantity demanded, the lower the absolute value of the price elasticity of demand Figure 5.2 "Price Elasticities of Demand for a Linear Demand Curve" shows the same demand curve we saw in Figure 5.1 "Responsiveness and Demand" We have already calculated the price elasticity of demand between points A and B; it equals −3.00 Notice, however, that when we use the same method to compute the price elasticity of demand between other sets of points, our answer varies For each of the pairs of points shown, the changes in price and quantity demanded are the same (a $0.10 decrease in price and 20,000 additional rides per day, respectively) But at the high prices and low quantities on the upper part of the demand curve, the percentage change in quantity is relatively large, whereas the percentage change in price is relatively small The absolute value of the price elasticity of demand is thus relatively large As we move down the demand curve, equal changes in quantity represent smaller and smaller percentage changes, whereas equal changes in price represent larger and Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 238