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

3 thoughts on “Point Method – Measures of price elasticity of demand”

  1. Thanks so much for giving everyone an exceptionally brilliant opportunity to check tips from this web site. It is often so pleasant and also stuffed with a lot of fun for me and my office friends to search your blog more than three times weekly to read through the latest guidance you have. Not to mention, I’m certainly fulfilled with your very good things you serve. Certain 2 tips in this posting are really the most efficient I have ever had.

  2. I am writing to make you know of the fabulous encounter my wife’s child obtained visiting the blog. She realized lots of pieces, not to mention what it is like to have a very effective coaching nature to get most people very easily know selected extremely tough topics. You truly surpassed our expected results. Many thanks for offering the invaluable, trustworthy, revealing and even unique tips about the topic to Jane.

  3. My husband and i ended up being absolutely peaceful that Peter managed to deal with his investigations from your precious recommendations he made out of your web page. It’s not at all simplistic to just always be giving out strategies which often a number of people may have been selling. We grasp we have got the blog owner to thank for that. All the explanations you have made, the simple site navigation, the relationships your site make it easier to promote – it’s many powerful, and it’s aiding our son in addition to the family know that that situation is brilliant, which is certainly tremendously fundamental. Many thanks for everything!

Leave a Reply

Your email address will not be published. Required fields are marked *