Elasticity along a straight line demand curve
Syllabus: Explain why PED varies along a straight line demand curve and is not represented by the slope of the demand curve.
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Let´s Do Some Economics
In May 2016 Paper 3 there was this question for 4 Marks
Q1b (ii) Explain why, for a linear demand curve, the price elasticity of demand is not represented by the slope of the demand curve. (4 Marks)
The markscheme says you could answer in these ways:
Level Descriptor
0 The work does not reach a standard described by the descriptors below. 0
1 The written response is limited. 1–2
For explaining that the gradient of a linear demand curve is constant along the curve, but PED changes, and that demand is more elastic at higher prices.
2 The written response is accurate. 3–4
For explaining that the gradient of a linear demand curve is constant along the curve. However, the rates of change of price and quantity are not constant. As price increases, the % change in price diminishes while the % change in quantity demanded increases. Therefore, the slope, which is constant, cannot represent the formula: PED = %ΔQd / %ΔP.
OR
an explanation that PED=slope× P
Q
Since the slope ΔQ is constant along a straight line, PED is equal to a constant number x P whose value constantly changes along the demand
ΔP Q
curve. Therefore, as we move along the demand curve, PED changes.
Also:
A response which uses dQ in this explanation should be rewarded.
dP
A response which explains that, as price increases, the price becomes a larger portion of income, hence the consumer becomes more responsive to changes in price, should be awarded a maximum of [3].
Q1b (ii) Explain why, for a linear demand curve, the price elasticity of demand is not represented by the slope of the demand curve. (4 Marks)
The markscheme says you could answer in these ways:
Level Descriptor
0 The work does not reach a standard described by the descriptors below. 0
1 The written response is limited. 1–2
For explaining that the gradient of a linear demand curve is constant along the curve, but PED changes, and that demand is more elastic at higher prices.
2 The written response is accurate. 3–4
For explaining that the gradient of a linear demand curve is constant along the curve. However, the rates of change of price and quantity are not constant. As price increases, the % change in price diminishes while the % change in quantity demanded increases. Therefore, the slope, which is constant, cannot represent the formula: PED = %ΔQd / %ΔP.
OR
an explanation that PED=slope× P
Q
Since the slope ΔQ is constant along a straight line, PED is equal to a constant number x P whose value constantly changes along the demand
ΔP Q
curve. Therefore, as we move along the demand curve, PED changes.
Also:
A response which uses dQ in this explanation should be rewarded.
dP
A response which explains that, as price increases, the price becomes a larger portion of income, hence the consumer becomes more responsive to changes in price, should be awarded a maximum of [3].
