If you calculate the midpoint elasticity when the price declines from R8 to R7, you will obtain an elasticity of 5 (relatively elastic). In this high price range and low quantity range, the percentage change in price is low (R8 to R7), while the percentage in quantity is high (10 to 20).
Calculating the midpoint elasticity for a change in price from R5 to R4 will give you a price elasticity of 1 (unitary elasticity).
For a change in price from R2 to R1 , you will obtain a price elasticity of 0,20 (relatively inelastic). In this low price range and high quantity range, the percentage change in price is high (R2 to R1), while the percentage in quantity is low (70 to 80).
Examine the data, not the graph, to decide whether demand is relatively inelastic, unitary elastic or relatively elastic.
Take note of the following:
Price elasticity of demand gives us a measure of the response of the quantity demanded to a change in the price. It is therefore closely related to (but not the same as) the slope of the demand curve. The slope of the demand curve is calculated from absolute changes in quantity and price, while price elasticity is calculated from relative changes.
As a rule of thumb, we can state that if we use the same scale on the axis, the flatter the curve that passes through a given point, the greater the price elasticity of demand will be, and the steeper the curve that passes through a given point, the smaller the price elasticity of demand will be.
