Question

Use the information in Table 2.5 to calculate the PED values as prices fall from $10 to $9, from $9 to $8, from $8 to $7 and so on. You should see that the PED value falls as you move down the demand curve. In the top half of the demand curve, PED > 1; in the bottom half of the demand curve, PED < 1. We could show that for very small changes in price, PED = 1 at the mid-point of the demand curve. That is why, in theory, a demand curve with unitary price elasticity throughout can be drawn. Total expenditure (the area beneath this curve) for any price quantity combination is constant in this situation

Answer 1

Explanation:

of supply

Both the demand and supply curve show the relationship between price and the number of units demanded or supplied. Price elasticity is the ratio between the percentage change in the quantity demanded (Qd) or supplied (Qs) and the corresponding percent change in price. The price elasticity of demand is the percentage change in the quantity demanded of a good or service divided by the percentage change in the price. The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.