Price Elasticity of Demand

Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.

Straight Line Demand Curve

A straight line demand curve is a linear relationship between price and quantity demanded. It is represented by the equation Q = a - bP, where Q is the quantity demanded, P is the price, and a and b are constants.

Mid-point of the Line

The mid-point of a straight line demand curve is the point where the price and quantity demanded are equal. At this point, the price is halfway between the maximum and minimum prices, and the quantity demanded is halfway between the maximum and minimum quantities.

Price Elasticity of Demand at the Mid-point

To calculate the price elasticity of demand at the mid-point of a straight line demand curve, we need to determine the percentage change in quantity demanded and the percentage change in price.

At the mid-point of the demand curve, the price is halfway between the maximum and minimum prices, so the percentage change in price is zero. This means that the price elasticity of demand at the mid-point is undefined or infinite.

Since the price elasticity of demand is undefined at the mid-point, it suggests that a small change in price will result in an infinitely large change in quantity demanded. This implies that demand is perfectly elastic at the mid-point of the demand curve.

In practical terms, this means that consumers are extremely responsive to changes in price at the mid-point. A small decrease in price will lead to a significant increase in quantity demanded, and a small increase in price will lead to a significant decrease in quantity demanded.

Conclusion

The price elasticity of demand at the mid-point of a straight line demand curve is undefined or infinite. This indicates that demand is perfectly elastic at this point, and consumers are extremely responsive to changes in price.