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First, we compute the slope of the demand curve. We find the derivative of the demand function. {eq}Q = 100 - 2p \\ Q'' = - 2 {/eq} Now, we can compute the price elasticity of demand.

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Apr 19, 2020 · Price Elasticity of Demand is also the slope of the demand curve. We can calculate the slope as “rise over run”. As the slope of the demand curve steepens, demand changes at a faster rate, which represents a higher elasticity. Conversely, flattening the curve causes demand to change at a slower rate, denoting relative inelasticity.

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Apr 19, 2020 · Price Elasticity of Demand is also the slope of the demand curve. We can calculate the slope as “rise over run”. As the slope of the demand curve steepens, demand changes at a faster rate, which represents a higher elasticity. Conversely, flattening the curve causes demand to change at a slower rate, denoting relative inelasticity. Since the price elasticity of demand is one, price must decline by 5%. But for the original firm, a 10% increase in production and a 5% decline in price indicate a price elasticity of two, not one. As firms get more and more numerous in an industry, the demand curve each sees gets more and more elastic.

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fact that the demand curve becomes more elastic, leading to a smaller markup, the firm’s profits increase because the demand curve shifts up. As Becker and Murphy point out, “advertising is profitable not because it lowers the elasticity of demand for the advertised good, but because it raises the level of demand [at any given price].”

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•The midpoint formula is preferable when calculating the price elasticity of demand because it gives the same answer regardless of the direction of the change. Price elasticity of demand = ()/[() ()/[()/ QQQQ PPPP 2121 2121 2 2 −+ −+ /]] •Example: If the price of an ice cream cone increases from \$2.00 to \$2.20 and the amount you buy ...