Problems using point elasticity, Microeconomics

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Problems Using Point Elasticity

- We may need to compute price elasticity over portion of demand curve instead of at a single point.

- The price and quantity used as base will alter price elasticity of demand.

Point Elasticity of Demand: An Example

-Assume that

Price rises from 8$ to $10 quantity demanded falls from 6 to 4
The percent change in price equals: $2/$8 = 25% or $2/$10 = 20%
The percent change in quantity equals: -2/6 = -33.33% or -2/4 = -50%

Elasticity equals:

-33.33/.25 = -1.33 or -.50/.20 = -2.54

-Which one is correct out of these?

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