Geometric Method - Economics Video Lecture | SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

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the elasticity of demand geometric
method or point method
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when the demand curve is linear we can
use geometric method to measure
elasticity of demand at a point on a
demand curve look at the demand curve ad
it is linear it has a uniform slope
suppose we want to measure elasticity of
demand at point B we can use the
geometric method according to this
method the formula to calculate
elasticity is length of the lower
segment of the demand curve divided by
length of the upper segment of the
demand curve the length of BD segment is
one centimetre the length of a b segment
is three centimeters then the elasticity
of demand is 1 by 3 it is less than 1
at point B the demand is relatively
inelastic this is the way that one can
measure elasticity using geometric
method this method is highly useful to
prove that the elasticity differ along
the demand curve even if the demand
curve is linear with uniform slope take
point II it is exactly at the middle of
the demand curve the length of the lower
segment is 2 centimeters and that of
upper segment is also 2 centimeters
using the formula the elasticity is 2x2
equal to 1 at Point E the elasticity is
unitary consider Point C there the lower
segment is 3 centimeters and upper
segment is 1 centimeter
3 divided by 1 equal to 3 3 is greater
than 1 and demand is relatively elastic
at Point C using the same technique we
can estimate the elasticity at points a
and D at Point a the lower segment of
the demand curve is 4 centimeters the
upper segment is 0 4 divided by 0 is
equal to infinity there is perfectly
elastic demand at Point a we shall now
find elasticity at Point D here the
lower segment is 0 the upper segment is
4 0 divided by 4 is equal to 0 hence the
demand is perfectly inelastic at D here
the thing that we have to understand is
though the slope is uniform and the
demand curve is linear the elasticity is
not the same at different points
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