Demand function is set as Qd=12500-500P. If the price of a unit is 10 find the elasticity of demand at this price.

Answer 1

This is a linear demand curve. The "top halfp" (closet to the price axis is elastic (elasticity less than -1). This is on the "bottom half" (closest to q axis).

Elasticity is chang in quantity/change in price time (price/quantity) when p =10, q = 7500. Change in Q demanded when price changes is - 500 sooooo

Elasticity - -500*(10/7500) = -2/3 which is inelastic