Here are the answers to the questions: 1) Using the formula: E = (% change in QD) / (% change in P) At point A: % change in QD = (100 - 80)/100 = 20% % change in P = (60 - 40)/40 = 50% E = -20/50 = -0.4 2) The elasticity value is between 0 and -1, meaning the demand is inelastic. 3) The demand curve would be downward sloping and relatively steep, indicating inelastic demand. Q.DXPXpointElasticityShape of demand curve 10040A-0.4InelasticSteep

1. Elasticity
Part (1)
Prepered by
Dr.Mohamed Osman
Lecturer of public economics faculty of
commerce-Alexandria University

2. Price Elasticity Of Demand
*Definition of the price Elasticity of Demand:-
*It measures the ratio of the percentage change in
quantity demand to the percentage change in
the price.
*It measures the degree to which the quantity
demanded responds to changes in the price
level, other things being equal.
* It can calculated as the ratio between the
percentage change in Q. D. and the percentage
change in Price .

3. *Measuring Demand price elasticity (E)
* Rules of the price Elasticity of demand:-
*We have there equations to measure E which are
-1-
*Price elasticity of demand=
Ex: If the Price rise by 10%,and the quantity demanded
fall by20% calculate price elasticity of demand ?
*price elasticity of demand = = -2
(it means that change in Px by 1% causes a change in
Q.Dx by 2% in the opposite direction)

4. 2-The price elasticity of demand at point:-
3-The price elasticity of demand at mid-point:-

5. Example
If the Price rise from 10 to 15, the
quantity demanded falls from 200
to 50, calculate point elasticity and
mid-point elasticity?

6. Answer
• P1 = 10 P2 = 15 P = P2 – P1= 15-10 = +5
• Q1 = 200 Q2 = 50 Q = Q2-Q1 = 50-200 = -150
*point elasticity:-
E = × = -1.5
*mid-point elasticity:-
E = × = -3

7. Example
Study that graph and answer :
1- Calculate price elasticity of demand at point A.
2- Calculate price elasticity of demand between
A&B .
Px
Qx
10
D
5
100 300
B
A

9. *Note that:
• The Sign of (E) must always be negative
due to the negative relationship
between the quantity demanded and
the price.
• in explaining the value of price elasticity
of demand we ignore its negative sign.

10. Meaning of demand price elasticity:
*What does it mean that demand price
elasticity = -6?
• It means that when price rise by 1%, the
quantity demanded falls by 6%, other things
being equal.
*What does it mean that demand price
elasticity = 0?
• It means that when price rises by 1%, the
quantity demanded falls by 0% (never
changed), other things being equal.

11. *Price Elasticity of demand & Shapes of
Demand curves
There are 5 shapes of demand curve which are:
1- Perfectly Inelastic Demand Curve:
*Price elasticity of demand = Zero
*Price elasticity of demand is constant
*Quantity demanded of that good will not respond to any changes in prices.
*Ex: very necessary goods such as medicines
Px
Q.D
P1
Q.D
P2
D

12. 2- Perfectly Elastic Demand Curve:
• Price elasticity of demand = 
• Price elasticity of demand is constant.
• it means that Q.D changes even if P is constant
Px
Q.D
P1
Q.d2
D
Q.d1

13. 3- Unitary Demand Curve (unit elastic ):
• Price elasticity of demand = 1
• Price elasticity of demand is constant.
• any percentage change in prices will cause an equal
percentage change in the quantity demanded, at any point
on the curve ( %Δ Q.D = % ΔP )
Px
Q.D
P2
Q.d1
D
Q.d2
P1

14. 4- Elastic Demand Curve:
• Price elasticity of demand > 1
• Price elasticity of demand isn't constant.
• any percentage change in prices will cause a greater
percentage change in the quantity demanded, at any point
on the curve. (%ΔQ.D ˃%ΔP)(flat).
• Ex: unnecessary goods such as soft drinks.
Px
Q.D
P2
Q.d1
D
Q.d2
P1

15. 5- Inelastic Demand curve:
• Price elasticity of demand < 1
• Price elasticity of demand isn't constant.
• any percentage change in prices will cause a smaller
percentage change in the quantity demanded, at any point
on the curve. (% ΔQ.D ˂ %Δ P)(steep).
• (Ex: necessary goods such as food)
Px
Q.D
P2
Q.d1
D
Q.d2
P1

16. • Elasticity and the downward sloping, straight
line demand curve:-
• Price elasticity of demand will vary from (0) to
(∞)
• In case of downward sloping straight line
demand Curve, As we move leftward (or as P
rises),The price elasticity of demand increases.
• From the next demand curve we find that
there are 5 types of Elasticity

18. • True or false:
1) If an increase in price of good (y) by 20%
causes a fall in its Q.D by 10% then the
demand for good (y) is elastic.
2) If the increase in price of fish has no effect
on its quantity demanded this means that
demand for fish is perfectly inelastic
3) The demand for soft drinks is more elastic
than the demand for medicines

19. 4-If the income elasticity of demand is greater
than one, it means that the good is
necessary.
5-There is a direct relation between the price
and price elasticity of demand if the demand
curve is straight line and has a negative slope.
6-A vertical demand curve would have a price
elasticity of zero.

20. Price Elasticity &Total revenue
• Total Revenue = Total Expenditure = P.Q
*The relation between Elasticity and (TE),(TR) is shown
below:
• PRICE   Elasticity > 1 (TE)&(TR) falls 
opposite relation (-VE related)
• PRICE   Elasticity = 1 (TE)&(TR)constant 
no relation
• PRICE   Elasticity < 1  (TE)&(TR )rises 
direct relation (+VE related)
• PRICE   Elasticity = 0  (TE)&(TR )rises 
direct relation (+VE related)

21. True or false:
1-If there is a good with elastic demand curve,
an increase in prices will because an increase
in total revenues.
2- If medicine have a perfectly inelastic demand
curve, then the producer will tend to
decrease prices.

22. 3) If the demand for a certain good is elastic,
then the seller can increase his total revenue
by increasing its price.
4) The producer always will rise his revenue as
he increase the price of his product.
5) If the price elasticity of demand is equal 1, it
means the total revenue increase when the
price decreases.

23. 6)If the demand for airplane travel is elastic,
then a reduction in the price of airline tickets
will increase total expenditures on airline
trips.
7)If the price elasticity of demand is inelastic,
the total revenue will increase when its price
increases.
8)The total expenditure for any product still
constant, if the price changes and the price
elasticity of demand = 1

24. The Determinants of the price
Elasticity of Demand
1)Importance of the good (-ve)
As the necessity of the good ↑ →price elasticity of demand ↓
(&vice versa)
• A necessity good  inelastic demand curve.
• A Luxury good  Elastic demand curve.

25. 2)Availability of substitutes (+ve)
As number of substitutes ↑ →price elasticity of demand ↑
(&vice versa)
• A good that have substitutes  Elastic demand curve
• A good that doesn't have substitutes inelastic demand curve

26. 3)Time (+ve)
*The longer the time period, the higher the
price elasticity of demand (&vice versa)
• In a short run  inelastic demand curve.
• In a long run Elastic demand curve.

27. 4- The Proportion of income spent on the good
• When a good have a small part of total
consumer budget, Elasticity will be smaller,
and vice versa, Direct relation.
• A good have a small part of total budget 
inelastic demand curve.
• A good have a large part of total budget 
elastic demand curve.

28. True or false:
1- The price elasticity of demand will be more
greater in long run
2- The demand curve in short run will be more
flat than it in long run

29. Q1:-
If you are given the following table:-
1) Calculate the price elasticity of demand .
2) Explain your result
3) Draw the correspondent demand curve
Q.DXPXpoint
10040A
8060B

30. Q2:-Fill in the following table