Point Elasticity of Demand

Point Elasticity of Demand

Point Elasticity of Demand

 Definition of Law of Demand:

" Demand is the relationship between price of a good and its demand. The law explains that when the price of a good increases, the quantity of its demand will decrease and on the other hand if price decreases, its quantity demanded will increase with no change in other.

The relationship between the prices of goods and their demand is called the elasticity of demand. When this relationship between price and demand is viewed at a particular point and measured at that particular point, such elasticity is called point elasticity of demand. It means that the point elasticity is actually the measure of a particular point at demand curve. This method is best used when demand is very smaller or modest.   

                                              

Explanation

When we measure the elasticity of demand at a given point, it is noted as the point elasticity of demand on the line.

If the given point is located right in the middle of demand curve, then the point elasticity of demand is equal to unit (E =1).

If the given point is located above the middle point of demand curve, then the point elasticity of demand is equal to unit (E >1).

If the given point is located below the middle point of demand curve, then the point elasticity of demand is equal to unit (E <1).

It explains that at the midpoint of the curve, the elasticity will always be unitary and higher we go from this point, the higher the elasticity is. And the lower we go from the midpoint, the lesser the elasticity will be as shown in the diagram.

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