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Let's say I have a demand curve looks something like this: enter image description here

How could I analyze who have the highest or lowest price elasticity of demand?

it seems that the point 1 has highest price or demand? But why? How does the graph tells us that information?

Any helps will be appreicate!

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There is no general way of determining elasticity from graph, however linear demand function has a property where demand is infinitely elastic at the top and then elasticity monotonously decreases (in range where $p>0$ and $q>0$) and is infinitely inelastic at the bottom.

Hence, in the case above you can say that $\epsilon_1> \epsilon_2 > \epsilon_3$ (where epsilon denotes elasticity at point $i$).

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  • $\begingroup$ Thanks for the answer. I am a little bit confused how could we understand why infinitely elastic at the top and then elasticity monotonously decreases? I feel like the elaticity should be all the same on this linear graph since we only looks at percentages changes in quantity v.s percentage changes in price. What am I missing??? Thanks! $\endgroup$
    – James
    Commented Apr 27, 2022 at 12:39
  • $\begingroup$ @James elasticity for a general linear demand $D=a-bp$ is given by $\frac{-bp}{a-bp}$ you can plug different numbers into that equation for $p$ and keep parameters of demand $b$ -slope of demand curve and $a$ - y intercept of demand curve constant and you will see that elasticity of linear demand curve is different everywhere. $\endgroup$
    – 1muflon1 ♦
    Commented Apr 27, 2022 at 13:34

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