Elasticity along a linear demand curve

Indian Economy glossary

Topic: Consumer Behaviour, Demand and Elasticity · NCERT: Class 12, Ch 2 "Theory of Consumer Behaviour"

Meaning

A straight-line demand curve has the same slope everywhere, but its elasticity changes from point to point. For a linear demand q = a − bp, elasticity is:

eD = −bp/q = −bp/(a − bp)

  • At p = 0 (on the quantity axis), eD = 0.
  • At the midpoint p = a/2b, |eD| = 1.
  • Below the midpoint, demand is inelastic (less than 1). Above the midpoint, it is elastic (more than 1).
  • Where q = 0 (on the price axis), eD is infinite.

Example

For D(p) = 10 − 3p at p = 5/3, the quantity is q = 5. So eD = −3 × (5/3) ÷ 5 = −1. Demand is unitary elastic here, because this price is the midpoint of the line.

Don't confuse with

  • Slope: slope is constant along a straight line, but elasticity is not. "A straight-line demand curve has constant elasticity" is FALSE.
  • Rectangular hyperbola: this curved demand line has |eD| = 1 at every point.

Related concepts

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