## Introduction to Elasticity

Read this chapter to learn about the concept of elasticity. Be sure to read all the sections in this chapter (Sections 5.1-5.4) following the introduction.

### 5.1 Price Elasticity of Demand and Price Elasticity of Supply

#### WORK IT OUT

#### Finding the Price Elasticity of Demand

Calculate the price elasticity of demand using the data in Figure 5.2 for an increase in price from G to H. Has the elasticity increased or decreased?

Step 1. We know that:

Step 2. From the Midpoint Formula we know that:Step 3. So we can use the values provided in the figure in each equation:

Step 4. Then, those values can be used to determine the price elasticity of demand:Therefore, the elasticity of demand from G to H 1.47. The magnitude of the elasticity has increased (in absolute value) as we moved up along the demand curve from points A to B. Recall that the elasticity between these two points was 0.45. Demand was inelastic between points A and B and elastic between points G and H. This shows us that price elasticity of demand changes at different points along a straight-line demand curve.