IBonomicsElasticity Along a Demand CurveHL
MicroeconomicsA diagram showing how price elasticity of demand changes along a straight-line demand curve, from elastic to unitary elastic to inelastic.
Curves and elements
- Demand curve
- Shows the inverse relationship between price and quantity demanded.
- PED > 1
- Elastic demand. At higher prices and lower quantities, quantity demanded is relatively responsive to price changes.
- PED = 1
- Unitary elastic demand. At the midpoint of the demand curve, the percentage change in quantity demanded equals the percentage change in price.
- PED < 1
- Inelastic demand. At lower prices and higher quantities, quantity demanded is relatively unresponsive to price changes.
Key explanations
- 1
Price elasticity of demand measures how responsive quantity demanded is to a change in price.
- 2
At higher prices and lower quantities, demand is elastic, meaning PED is greater than 1.
- 3
At the midpoint of a straight-line demand curve, demand is unitary elastic, meaning PED equals 1.
- 4
At lower prices and higher quantities, demand is inelastic, meaning PED is less than 1.
Example exam question
Explain how price elasticity of demand changes along a straight-line demand curve.
Show example answer
Along a straight-line demand curve, demand is elastic above the midpoint, unitary elastic at the midpoint, and inelastic below the midpoint.
