Lines And Slopes Worksheets With Answers - Hec Montreal Page 7

3.2.

Elasticity problems

A supply or demand problem sometimes gives as initial information only the

equilibrium price and quantity and the price‐elasticity. The latter measures the

effect of a variation of the price on the supply or demand. We must remember

that the price‐elasticity is defined by the relation

Where the represented parameters are

: price

: quantity

: derivative of the equation of the quantity with respect to the

price

In a case where the price and the quantity of a product linearly depend on one

another, we can use the average variation instead of the derivative, i.e.

∆

If the price and quantity of a product linearly depend on each other, then the

supply or demand function will have the form

where is the slope of the line and is defined by

∆

So, without knowledge of even two points of the line, we can still evaluate the

slope if the price‐elasticity coefficient is given.

∆

. →

∆

Page 7 of 9

0 votes

Parent category: Education