Download The given data set is

The given data set is
Product price
Quantity demanded
5
1
4
2
3
3
2
4
1
5
The demand curve is given below:
Demand Curve
6
5
Price
4
3
2
1
0
0
1
2
3
4
5
6
Quantity
The price elasticity of demand is the ratio of the percentage change in quantity to the
percentage change in price.
The midpoint formula for Elasticity of demand is
Ed = Change in quantity/(sum of quantities/2)
Change in price/(sum of prices/2)
For the price change $5 to $4, the elasticity demand is given by,
Ed = [(2-1)/(3/2)]/[(5-4)/(9/2)] = (1/1.5)/(1/4.5) = 4.5/1.5 = 3
For the price change $4 to $3, the elasticity demand is given by,
Ed = [(3-2)/(5/2)]/[(4-3)/(7/2)] = (1/2.5)/(1/3.5) = 3.5/2.5 = 1.4
For the price change $3 to $2, the elasticity demand is given by,
Ed = [(4-3)/(7/2)]/[(3-2)/(5/2)] = (1/3.5)/(1/2.5) = 2.5/3.5 = 0.7143
For the price change $2 to $1, the elasticity demand is given by,
Ed = [(5-4)/(9/2)]/[(2-1)/(3/2)] = (1/4.5)/(1/1.5) = 1.5/4.5 = 0.3333
Thus the Elasticities of demand from top to bottom are 3; 1.4; 0.7143; 0.3333.
Slope does not measure elasticity. This demand curve has a constant slope of -1 (= -1/1),
but elasticity declines as we move down the curve. When the initial price is high and
initial quantity is low, a unit change in price is a low percentage while a unit change in
quantity is a high percentage change. The percentage change in quantity exceeds the
percentage change in price, making demand elastic. When the initial price is low and
initial quantity is high, a unit change in price is a high percentage change while a unit
change in quantity is a low percentage change. The percentage change in quantity is less
than the percentage change in price, making demand inelastic.