How and why does price elasticity change along a demand curve?

Price elasticity of demand is defined as the proportional change in demand to a change in price. If the response in demand is more than proportional to the price change, demand is elastic. A less than proportional change in demand shows inelastic demand. 

However, along one demand curve, elasticity changes depending on the position on the demand curve. At the top end of the demand curve, an increase in price from say, 1 to 2, leads to a decrease in demand of say, 10 to 9. Although the units of change are identical, there is a 100% increase in price from 1 to 2, but a 10% decrease in demand from 10 to 9. By definition this shows inelastic demand as there only a 10% decrease in demand from a 100% increase in price.

At the lower end of the demand curve, an increase in price from say, 9 to 10, leads to a decrease in demand from say, 2 to 1. The price change is 1/9 so around 11%, but demand falls by 50% from 2 to 1. By definition this is elastic demand as the change in demand (50%) is more than proportional to the price change (11%).

This is an advanced evaluation of price elasticity, but would be impressive in an Oxbridge interview.

AW
Answered by Andrea W. Economics tutor

34244 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

What are the characteristics of perfect competition?


In the early 2010s the mobile phone company Orange merged with another mobile Network firm, T Mobile, in order to a form a new company called EE. Explain what type of merger this is and discuss some of the possible costs and benefits of this merger.


Evaluate the likely economic effects of an increase in government expenditure on infrastructure


Why does the price elasticity of demand (PED) of a product change at different levels of production?


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2026 by IXL Learning