Arc price elasticity of demand

Own-price elasticity of demand: general formula: e = %DQd/%DP. (Note: by the law of demand Qd and P always move in the opposite directions, so e is always negative. In practice, most economists drop the sign and focus only on the size. We'll do that.)

                            Q2 - Q1
                         ------------
                %DQd    (1/2)(Q2+Q1)
Arc method: e = ----- = --------------
                 %DP        P2 - P1
                         ------------
                         (1/2)(P2+P1)

Case 1	Case 2	Case 3
P1=4, Q1=6: TE1 = ______ P2=7, Q2=5: TE2 = ______	P1=4, Q1=6: TE1 = ______ P2=5, Q2=3: TE2 = ______	P1=4, Q1=6: TE1 = ______ P2=6, Q2=4: TE2 = ______
e = ______	e = ______	e = ______
Classification of demand elasticity (elastic, unit elastic, inelastic):
_______________	_______________	_______________
The rules of elasticity (allow you to predict how price and total expenditure are related):

Test your understanding:
    1. True or false? If quantity demanded falls when the price rises, then demand must be elastic.
    Answer: ___

    2. If price rises by 30% and total revenue rises by only 10% then demand is
    a. elastic.     b. inelastic.     c. unit elastic.
    Answer: ___