1. Chapter Five:
Elasticity

2. The Price Elasticity of Demand

3. Table 5.1: Relationship Between Price and Quantity Demanded for Braeburn’s Poetry Book

4. Figure 5.1: Demand Curve for Braeburn’s Poetry Book
We can use a demand curve to calculate the price elasticity of demand.

5. Figure 5.2: Perfectly Inelastic Demand and Perfectly Elastic Demand
When the quantity demanded is constant regardless of price, demand is perfectly inelastic. When even a small increase in price will reduce the quantity demanded to zero, demand is perfectly elastic.

6. Figure 5.3: Elasticity Varies Along a Straight-Line Demand Curve
Above point A demand is elastic but below point A demand is inelastic.

7. Figure 5.4: Changing the Scale of Braeburn’s Demand Curve
We cannot make conclusions about elasticity simply by looking at a demand curve. By changing the scale of the axes we can make a demand curve “look” more or less elastic.

8. Figure 5.5: Braeburn’s Book Revenues
Braeburn’s book revenues equal areas A+B at a price of $5 per book. Revenues equal areas A+C at a price of $10 per book.

9. Table 5.2: Effects of Price Changes on Revenues

10. Table 5.3: Some Estimated Price Elasticities of Demand

11. The Price Elasticity of Supply

12. Figure 5.6: Price Elasticity of Supply
Supply curve Se is more elastic than supply curve Si. Thus with supply curve Se a company can entice their supply to increase the quantity supplied to Q1 with a smaller price increase.

13. Income Elasticity of Demand

14. Figure 5.7: Income Elasticity of Demand
An increase in income shifts the demand curve outward (to the right). The greater the income elasticity of demand, the greater the shift.