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The elasticity of demand usually will vary depending on the price. If the demand curve is linear, demand is inelastic at high prices and elastic at low prices, with unitary elasticity somewhere in between. There does exist a family of demand curves with constant elasticity for all prices.
A linear demand curve's slope is constant, to be sure, but the elasticity can change even if / is constant. [13] [14] There does exist a nonlinear shape of demand curve along which the elasticity is constant: = /, where is a shift constant and is the elasticity.
This happens in the linear case if the supply and demand curves have exactly the same slope (in absolute value). If the supply curve is less steep than the demand curve near the point where the two curves cross, but more steep when we move sufficiently far away, then prices and quantities will spiral away from the equilibrium price but will not ...
If the demand curve is linear, then it has the form: Qd = a - b*P, where p is the price of the good and q is the quantity demanded. The intercept of the curve and the vertical axis is represented by a, meaning the price when no quantity demanded. and b is the slope of the demand function.
This is linear in income (), so the change in an individual's demand for some commodity with respect to a change in that individual's income, (,) = (), does not depend on income, and thus Engel curves are linear.
The elasticity of demand is different at different points of a demand curve, so for most demand functions, including linear demand, a firm following this advice will find some price at which | | = and further price changes would reduce revenue.
The marginal revenue function is the first derivative of the total revenue function or MR = 120 - Q. Note that in this linear example the MR function has the same y-intercept as the inverse demand function, the x-intercept of the MR function is one-half the value of the demand function, and the slope of the MR function is twice that of the ...
A kink in an otherwise linear demand curve. Note how marginal costs can fluctuate between MC1 and MC3 without the equilibrium quantity or price changing. The Kinked-Demand curve theory is an economic theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain sticky prices.