Figure 5.3 and Table 5.2 both set out some important but tedious rules. Let’s practice them, since they are quite likely to be on an exam. For each of the following cases, state whether the demand curve is relatively steep or flat, and whether a fall in price will raise total revenue or lower it. In this case note that we present the elasticity in terms of its absolute value.
a. Elasticity of demand = 0.2
b. Elasticity of demand = 2.0
c. Elasticity of demand = 10.0
d. Elasticity of demand = 1.1
e. Elasticity of demand = 0.9