Elasticity
Price elasticity of demand, total revenue, and elastic vs. inelastic ranges.
What this graph shows
This is a price elasticity of demand explorer built around a single downward-sloping demand curve. It shows how responsive the quantity buyers want is to a change in price, and it ties that responsiveness directly to total revenue, the shaded rectangle equal to price times quantity.
The interactive gives you two sliders. Demand Slope changes how steep or flat the curve is, from steep and inelastic to flat and elastic. Price Point moves a marker up and down the same curve. As you move either one, the graph reports the elasticity value, labels the point as Elastic, Inelastic, or Unit elastic, and redraws the revenue rectangle so you can watch total revenue rise or fall.
How to read it
Price is on the vertical axis and quantity on the horizontal. The blue dot marks the price and quantity you have chosen, with dashed reference lines dropping to each axis. The elasticity value labeled |Ed| appears next to the dot: greater than one is elastic, less than one is inelastic, and exactly one is unit elastic. The shaded rectangle from the axes out to the dot is total revenue, so watch its area, not just its shape, to see whether a price change helps or hurts revenue.
Three things to try
- Slide the Price Point high up the curve and read the elasticity, then slide it low, and notice the same curve is elastic near the top and inelastic near the bottom.
- Flatten the Demand Slope toward the elastic end and watch the elasticity value climb well above one at the same price.
- Move the Price Point until the label reads Unit elastic, and confirm the total revenue rectangle is at its largest area right at that point.
Common questions
How can the same demand curve be both elastic and inelastic?
On a straight-line demand curve, elasticity changes as you move along it. The upper section near high prices is elastic, the lower section near low prices is inelastic, and the exact midpoint is unit elastic, which you can verify by sliding the price point up and down.
How do you read total revenue on an elasticity graph?
Total revenue is the rectangle formed by the price on the vertical axis and the quantity on the horizontal axis, since revenue equals price times quantity. Compare the area of that rectangle at two different price points to see which price brings in more.
What does the total revenue test tell you here?
In the elastic range, cutting price raises total revenue because quantity rises more than price falls. In the inelastic range, cutting price lowers revenue, and revenue peaks exactly where demand is unit elastic.
Elasticity: key terms
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