We can evaluate the price elasticity of demand at a point on linear demand curve. The formula to find out ep through point method is,
For illustration, in figure above, the length of the demand curve AB is 4 cm.
Accurately at the middle point of AB demand curve,A) ep at point e:
ep = EB/EA = 2/2 = 1 ∴ ep = 1 B) ep at point D = (middle point of EB part of demand curve)
ep = DB/DA = 1/3 = 0.3 ∴ ep < 1 C) ep at point c (middle point of EA part of demand curve)
ep = CB/CA = 3/1 = 3 ∴ ep > 1 D) ep at point B = 0/AB = 0
(i.e., o by anything is zero, a mathematical principle) ∴ ep = 0E) ep at point A = AB/0 = ∞
(That is, anything divided by zero becomes infinity a mathematical principle) ∴ ep = ∞
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