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Elasticity and linear demand

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Please re-word the following into your own words and include some examples. Its a respond to the question, Explain why the price elasticity of demand varies along a demand curve, even if the demand curve is linear.

As we move down a demand curve, the percentage change in price (quantity) varies. When price is relatively high, a one unit change in price is small in percentage terms. When price is relative low, a one unit change is much higher as a percent of the price. The same is true for quantity demanded. Given the inverse relationship between price and quantity along a demand curve and the formula for calculating elasticity, as we move down a demand curve, percentage change in price increases and the corresponding percentage change in quantity demanded increases, causing the ratio of the two to get smaller in absolute terms.

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Solution Summary

The inverse relationship between price and quantity in a linear demand curve are explained in the solution.

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Elasticity of demand = % change in quantity / % change in price

A linear demand curve starts at a point of high price, low quantity demanded, as we move down the curve, the prices and the quantity demanded increases. When the price high, a decrease in one unit is small as percentage of the mid point between original price and new price (for the arc elasticity of ...

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