ECON 101Principles of Microeconomics · Chapter 04

Chapter 4 · Focused interactive companion

One demand line.
Changing responsiveness.

Move one price point down a straight-line demand curve. Watch elasticity fall, total revenue rise to a maximum, and then turn downward.

Start with elasticity
  • 1linked lab
  • 2synchronized charts
  • 8retrieval questions
same point · two charts
MoveChange price and travel along one fixed demand curve.
MeasureRead point elasticity from slope multiplied by P/Q.
ConnectTrack the same point on the total-revenue curve.
01

Constant slope does not mean constant elasticity

Move along the linear demand curve

The weekly demand for digital-media studio sessions is fixed at . Only price changes. Quantity, point elasticity, classification, and total revenue update together.

01 · Identify the slope

The demand curve keeps the same slope at every point.

02 · Calculate the point

Substitute the selected price to find quantity demanded.

03 · Measure responsiveness

The changing ratio P/Q makes elasticity fall down the line.

Elasticity–revenue lab

One selected market point

Demand and revenue move together

Q: 0–500 · P: 0–100 SAR
DemandPrice and quantity
Total revenueTR = P × Q

02

The total-revenue test

See why revenue rises, peaks, and falls

Total revenue is price multiplied by quantity. A price cut lowers revenue per unit but sells more units. Elasticity tells which percentage effect is larger.

Current calculation

Elastic · Eᵈ > 1Price cut → total revenue rises

Quantity rises by a larger percentage than price falls.

Unit elastic · Eᵈ = 1Total revenue is maximized

The opposing percentage effects balance at the midpoint.

Inelastic · Eᵈ < 1Price cut → total revenue falls

Quantity rises by a smaller percentage than price falls.

Reference points on
PriceQuantityElasticityTotal revenueRegion
75 SAR1253.009,375 SARElastic
50 SAR2501.0012,500 SARUnit elastic
25 SAR3750.339,375 SARInelastic
03

Retrieval practice

Check the elasticity–revenue logic

Use the linked charts and calculations above to answer each question.

01For , point price elasticity equals:

02Above the midpoint of a straight-line demand curve, demand is:

03When demand is elastic, a small price cut causes total revenue to:

04Along a straight-line demand curve, total revenue reaches its maximum where:

05For , when and , point elasticity equals:

06Why does point elasticity change along this straight demand curve even though its slope is fixed?

07At and , demand is inelastic. A small further price cut makes total revenue:

08At the unit-elastic point, total revenue is at its maximum. Moving a little to either side makes total revenue:

Not checked

Chapter 4 · Elasticity and total revenue

Slope fixes the line; P/Q changes responsiveness; responsiveness determines how price moves revenue.

CalculateUse slope magnitude multiplied by P/Q at one point.
ClassifyElasticity falls from elastic to unit elastic to inelastic.
ConnectTotal revenue peaks exactly where demand is unit elastic.