Step 4. Then, we can use those values to determine the price elasticity of demand:

Therefore, the elasticity of demand from G to is H 1.47. The magnitude of the elasticity has increased (in

absolute value) as we moved up along the demand curve from points A to B. Recall that the elasticity between

these two points was 0.45. Demand was inelastic between points A and B and elastic between points G and H.

This shows us that price elasticity of demand changes at different points along a straight-line demand curve.

Calculating the Price Elasticity of Supply

Assume that an apartment rents for $650 per month and at that price the landlord rents 10,000 units as Figure

5.3 shows. When the price increases to $700 per month, the landlord supplies 13,000 units into the market. By

what percentage does apartment supply increase? What is the price sensitivity?
116 5 • Elasticity

FIGURE 5.3 Price Elasticity of Supply We calculate the price elasticity of supply as the percentage change in
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