ECON 200 Lecture Notes - Lecture 11: Midpoint Method, Demand Curve
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Goods tend to have more elastic demand over longer time horizons. A larger price elasticity implies a greater responsiveness of quantity demanded to changes in price. Use midpoint method for calculating elasticities when using two points from a demand curve. The midpoint method computes a percentage change by dividing the change by the midpoint (or average) of the initial and final levels. is the midpoint between and . Therefore, according to the midpoint method, a change from to is considered a 40 percent rise (6-4)/5 = 40. Demand is considered elastic when the elasticity is greater than 1, which means the quantity moves proportionately more than the price. Demand is considered inelastic when the elasticity is less than 1, which means the quantity moves proportionately less than the price. Unit elasticity - when the elasticity is exactly 1. The flatter the demand curve that passes through a given point, the greater the price elasticity of demand.