Page 127 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes Self Assessment

State whether the following statements are True/False:
8. An individual demand curve is that curve which shows the quantity of demand by consumer on
different prices of commodity.
9. Market demand curve is horizontal summation of individual curves.
10. When the demand decreases on decreasing the price of any commodity while remaining other things
are same is known as extension of demand.
11. When the demand increases on increasing the price of any commodity while remaining other things
are same is known as contraction of demand.
12. By change in price of a commodity, consumer’s revenue and price in related commodity, the
measurement of upcoming change in quantity of demand will be known as elasticity of demand.

6.14 Some Theorems Related to Elasticity of Demand

Theorem 1.

The Elasticity of Demand on a straight line demand curve varies downward from zero to infinity
The value of elasticity of demand is zero at that point on which the demand curve touches the OX-axis
and infinite on that point on which curve touches the OY-axis. Therefore, on increase in price, elasticity
of demand also increases on a simple demand curve. This statement is cleared by the Fig. 6.22.

Fig. 6.22
Y
E = ∞
A
Price (`) K R

M S

E = 0
O X
T N B
Quantity

Price elasticity of demand is measured as follows—
Per cent Change in Demanded Quantity of X-commodity
E = – ___________________________________________________
d Per cent Change in Price of X-commodity
Above equation can be written in the following way—
)
(
1
P __
E = × ______________________

d Q Slope of Demand Curve
∆P
Because slope of a simple demand curve is equal to ___ . We know that the slope of a simple demand

∆Q
(
)
1

curve is equal of its all the points that is why the reciprocal ______________________ of slope will also

Slope of Demand Curve
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