ECON 230D1 Chapter 3: Chapter 3
14 Dec 2017
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In the case that we have a linear demand curve modeled by the function q = a - bp, the elasticity function can be rewritten to work with this curve. The rewritten format is as follows: = -b(p/q) for the demand function q = a - bp. On the downward sloping demand curve, each point has a di erent elasticity, whereas on horizontal and vertical demand curves, the elasticity remains constant for every point on the curve. The horizontal demand curve is known as perfectly elastic, because any increase in price will result in an in nite drop in demand. Similarly, a vertical demand curve is known as perfectly elastic because any change in price will have no change in the quantity demanded. (see below) If the demand curve we"re dealing with isn"t perfectly linear, we can still nd the elasticity of the curve at certain points via the use of derivatives.
