# Point Method – Measures of price elasticity of demand

Point method is used when the demand curve is a straight line. In this method we measure elasticity at a particular point on the demand curve. This method has now become the most common method of measuring elasticity of demand. We draw a demand curve DD and draw line AB tangent to the demand curve as in the Figure. The slope of DD in AB is the same between point P and P1′ we find elasticity between two points P and P1 which we should assume to be close to each other (so close that they can be taken as one point).

The elasticity of demand can be defined as:

EP =

Now the percentage change in the quantity demanded can be presented as:

EP = × 100

Similarly, the percentage change in price can be presented as:

EP = × 100

The formula can be elaborated as:

After simplification we have

EP = *×

After re-arranging the above equation, we get

EP = ×

Or, ________________________________, in which

Change in quantity demanded

Change in price

P = price

Q = Quantity

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