Microeconomics,, 16th Canadian Edition

(Sean Pound) #1

Figure 4-2 Elasticity Along a Linear Demand Curve


over its whole length. Figure 4-2 shows that a negatively sloped linear
demand curve does not have a constant elasticity, even though it does
have a constant slope. A linear demand curve has constant elasticity only
when it is vertical or horizontal. Figure 4-3 illustrates these two cases, in
addition to a third case of a particular non-linear demand curve that also
has a constant elasticity.


Moving down a linear demand curve, price elasticity falls continuously,
even though the slope is constant. For each of the three intervals shown,
the absolute change in the price is $2 and the absolute change in quantity
demanded is 10 units. But for low quantities (and high prices) along an
interval such as AB, these percentage changes are quite different than
with high quantities (and low prices), such as for interval EF. The result is
that price elasticity falls as we move down and to the right along a linear
demand curve.



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