On Teaching Price Elasticity of Demand and Change in Revenue due to Price Change -- A Synthesis with and without Calculus
AbstractPrice elasticity of demand measures how much, in terms of percentage change, the quantity demanded responds to a change in price. In this pedagogical note, first we intuitively introduce the very first notion of price elasticity, which is a directional measure because it describes the impact of an arbitrary change in price from one to another on the percentage change in quantity demanded. Next, we show how this measure becomes "point" price elasticity of demand when demand is linear. Finally, with help from calculus, we show how it leads to the development of (point) price elasticity of demand in general. At each stage, qualitative results concerning changes in total revenue and price are given and compared with what are in textbooks. A quantitative result regarding predicting the percentage change in total revenue from the price elasticity of demand and the percentage change in price is also given for the case of linear demand. By working progressively from the directional measure to the linear case followed by the general case, and from non-calculus approach to calculus approach, with precise definitions and 6 propositions, we intend to provide a unified framework for teaching the notion and applications of price elasticity in principles of economics as well as intermediate microeconomics. Flaws in textbooks are identified and resolved as well.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.
Volume (Year): 12 (2013)
Issue (Month): 1 (June)
elasticity; revenue; demand function;
Find related papers by JEL classification:
- A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
- B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
- D00 - Microeconomics - - General - - - General
- C00 - Mathematical and Quantitative Methods - - General - - - General
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yi-Ju Su).
If references are entirely missing, you can add them using this form.