Price elasticity of two parallel demand curves, Managerial Economics

Assignment Help:

It can be geometrically proved that two elasticity are equal, which is., QB=RD Let's first consider ΔAOB. If we draw a horizontal line from point Q to intersect the vertical axis at point P and an ordinate from Q to M at the horizontal axis, we have 3 triangles- ΔAOB, ΔAPQ and ΔQMB. Note that ΔAOB, ΔAPQ and ΔQMB are right-angles. Thus, all the three triangles are right-angled triangles. As noted above, ratios of their two corresponding sides of similar right-angle triangles are always equal.

Considering only the relevant triangles, ΔAPQ and ΔQMB, we have

BQ/MQ =AQ/AP

Since MQ = OP, by substituting OP for QM in ratio BQ/MQ, we get

BQ/OP = AQ/AP

Therefore, BQ/AQ =OP/AP = Elasticity of demand curve AB, at point Q or at price OP.

We can similarly prove that

RD/RA = OP/PA = Elasticity of demand curve AD, at point R or at price OP.

 

Therefore it is proved, that at price OP,

QB/QA = RD/RA = PO/PA

It is hence proved that two demand curves with different slopes have the same elasticity at a given price.

317_Price Elasticity of two parallel demand curves.png

Price Elasticity of two parallel demand curves


Related Discussions:- Price elasticity of two parallel demand curves

Describe the managerial functions, Describe the Managerial functions A ...

Describe the Managerial functions A manager has to take numerous decisions that conform to the objectives of the firm. Several business decisions fall prey to conditions of ris

Open economy, Open Economy None of the three economies considered so f...

Open Economy None of the three economies considered so far are engaged in trade with Foreign Countries.  Such economies are often referred to as Closed Economies.  In contrast

Derevatives ., how to solve problems using derivatives ?

how to solve problems using derivatives ?

Type of economic system, Question 1: (a) Briefly explain and distingui...

Question 1: (a) Briefly explain and distinguish between a centrally planned, laissez-faire and mixed economy. (b) According to you, which kind of economic system is most d

Trade cycle-schumpeter description, Schumpeter Description According to...

Schumpeter Description According to Schumpeter, a cycle represents wave like deviations in business activity from the equilibrium or trend line. There are equilibrium points an

Determine the law of demand curve, Determine the law of Demand Curve Th...

Determine the law of Demand Curve The law of demand can also be presented through a curve known as demand curve. Demand curve is a locus of points showing numerous alterative p

Maximisation model, write a note on marris growth maximising model?

write a note on marris growth maximising model?

Distinguish between positive and negative externalities, Question 1: 1 ...

Question 1: 1 Explain the importance of barriers to entry in the control of Monopoly rents. 2 Discuss the extent to which competition leads to market promotion? Questi

1, critically analyze the firm''s theory of profit maxmization

critically analyze the firm''s theory of profit maxmization

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd