BaselineScenario AlternativeScenario Intercept: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 20 25 50 99 100 Intercept: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 20 25 50 99 100 Slope: .05 .10 .15 .20 .25 .30 .35 .40 .45 .50 .55 .60 .65 .70 .75 .80 .85 .90 .95 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.0 3.0 4.0 5.0 Slope: .05 .10 .15 .20 .25 .30 .35 .40 .45 .50 .55 .60 .65 .70 .75 .80 .85 .90 .95 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.0 3.0 4.0 5.0 Please press to create graph A graphical model using two demand functions illustrates how elasticity affects the relationship between price changes and revenue changes along a linear demand schedule. ...Select or change the slope and intercept parameters and click on the rectangular button to begin the simulation. A graphical depiction and the two scenarios and textual narrative is presented to demonstrate and explain the effects of elasticity on the responsiveness of revenue to changes in price given the intercept and slope of a linear demand function. After selecting parameters, the two demand functions and the corresponding revenue functions are depicted in a graphical illustration with narrative decribing key points of the graph to explain how elasticity affects the relationship between price and revenue changes. The demand function being analysed is linear (a straight line). The graphical analysis that follows includes descriptive narrative about solution for interpreting parameters that affect the position and steepness (slope) of the demand function and the corresponding revenue function. The term parameter means a factor that shifts the curves whilst, the term variable refers to either price or quantity on the visual spanning axis. The elasticity ( ) formula used is: = ( Q / Q0 ) / ( P / P0 ) where Q = Q1 -Q0 and P = P1 - P0 Note: The mid-point formula will provide more accurate results for cases when the sign of marginal revenue changes along the segment in question. The mid-point formula is: = ( Q / [(Q0+Q1)/2] ) / ( P / [(P0+P1)/2] ) Net-TextBook Surfsite
The demand function being analysed is linear (a straight line). The graphical analysis that follows includes descriptive narrative about solution for interpreting parameters that affect the position and steepness (slope) of the demand function and the corresponding revenue function. The term parameter means a factor that shifts the curves whilst, the term variable refers to either price or quantity on the visual spanning axis.
The elasticity ( ) formula used is:
Note: The mid-point formula will provide more accurate results for cases when the sign of marginal revenue changes along the segment in question. The mid-point formula is:
Net-TextBook Surfsite