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Question
Consider the demand curve D(p) = 10 − 3p. What is the elasticity at price `5/3` ?
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Solution
D(p) = 10 − 3p
`(Delta D(p))/(Delta p) = -3 `⇒ Change in demand per unit change in price
`e_d = (DeltaQ)/(Deltap) xx p/Q`
`Þ - 3 xx p/(10-3p) Þ (-3p)/(10-3p)`
At price p `= 5/3`,
`e_d = (-3 xx 5/3)/(10-3 (5/3))`
`e_d Þ (-5)/5 = -1`
i.e., the elasticity of demand at price p =`5/3` is unitary elastic.
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