Figure 5.3 shows that the elasticity decreases along a linear demand curve as the price falls. 1. At any price above the midpoint, demand is elastic.
{"Image DocumentName": "5.1 THE PRICE ELASTICITY OF DEMAND", "Image ImageDescription": "Figure 5.3 shows that the elasticity decreases along a linear demand curve as the price falls. 1. At any price above the midpoint, demand is elastic. 2. At the midpoint, demand is unit elastic. To show the importance of a units-free measure of elasticity, you can calculate the slope of a demand curve when the vertical axis is measured in dollars and again when it is measured in cents. Draw a demand curve for tacos, such that when the price rises from  1.00 to  1.05, the quantity demanded decreases from 50 to 45 tacos. The slope of the demand curve with the price measured in dollars is \u22120.01. Then, draw the identical demand curve, only this time measure the price in cents. When the price rises from 100 cents to 105 cents, the quantity demanded decreases from 50 to 45 units. Now the slope is \u22121.00. Point out that having the slope of the identical demand curve change simply because the units of the price change is surely not a good feature. In addition, the slope changes when the quantity units change. For this reason, economists do not use the slope as their measure of sensitivity. They use elasticity because elasticity is calculated using units-free percentage changes. Elasticity does not change if the units of the price or the quantity are changed. 3. At any price below the midpoint, demand is inelastic.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}