Microeconomics

Table of Contents

1. Topic pack - Microeconomics - introduction
2. 1.1 Competitive Markets: Demand and Supply
3. 1.1 Competitive Markets: Demand and Supply - notes
4. 1.1 Competitive markets - questions
5. 1.1 Competitive markets - simulations and activities
6. 1.2 Elasticities
7. 1.2 Elasticities - notes
8. Section 1.2 Elasticities - questions
9. Section 1.2 Elasticities - simulations and activities
   1. DragIT - Calculating elasticity
   2. DragIT - Elasticity
10. 1.3 Government intervention
11. 1.3 Government Intervention - notes
12. 1.3 Government intervention - questions
13. 1.3 Government intervention - simulations and activities
14. 1.4 Market failure
15. 1.4 Market failure - notes
16. Section 1.4 Market failure - questions
17. Section 1.4 Market failure - simulations and activities
18. 1.5 Theory of the firm
19. 1.5 Theory of the firm - notes (HL only)
20. Section 1.5 Theory of the firm - questions
21. Section 1.5 Theory of the firm - simulations and activities
22. Print View

DragIT - Calculating elasticity

In the diagram below, shift the demand curve to the right by 15 units. Do this by clicking on the 'D1' label and, keeping the mouse pressed, drag it to the right. Note that the slope remains the same (i.e. -5). Once you have done this, try the questions below.

1

Price elasticity What is the value of the price elasticity on demand curve D1 when the price rises from £5 to £7? The price has risen from £5 to £7 - this is a 40% change in price. When the price rises, the quantity demanded falls from 25 to 15. This is a 40% change in quantity. The percentage change in demand divided by the percentage change in price (40%/40%) is therefore 1.

2

Price elasticity What is the value of the price elasticity on demand curve D2 (once dragged to its new position) when the price rises from £5 to £7? The price has risen from £5 to £7 - this is a 40% change in price. When the price rises, the quantity demanded falls from 40 to 30. This is a 25% change in quantity. The percentage change in demand divided by the percentage change in price (25%/40%) is therefore 0.625.