<p>It is correct that the higher the elasticity is the more flat the demand curve will be. A higher elasticity means that demand responds disproportionately more to change in prices. In fact an example of demand curve where elasticity <span class="math-container">$ | \epsilon|  = \infty$</span> would be a flat horizontal demand curve.</p>
<p>The reason for this is that elasticity of demand tells you how much quantity demanded (plotted by convention on x-axis) changes in response to change in price (by convention plotted on y-axis). In order for a small price change (small distance 'traveled' across y-axis) to have large impact on quantity (distance 'traveled' across x-axis) the curve has to be relatively 'flat' since the slope which will be the rise/run of tangent line at a given point must be relatively small.</p>
<p>For example if elasticity <span class="math-container">$| \epsilon | = 2$</span> that means that <span class="math-container">$1\%$</span> decrease in price increases quantity demanded by <span class="math-container">$2\%$</span>. Since total revenue is defined as price times quantity <span class="math-container">$P*Q$</span> if <span class="math-container">$P$</span> decreases only by <span class="math-container">$1\%$</span> but <span class="math-container">$Q$</span> increases by <span class="math-container">$2\%$</span> the total revenue has to increase.  So the answer provided is correct.</p>
<p>To actually showcase how the demand becomes more 'flat' I generated 3 constant elasticity of demand functions (<span class="math-container">$P=Q^{1/\epsilon}$</span>) using R for natural numbers <span class="math-container">$Q = 1, ..., 10$</span>. The blue demand curve has constant elasticity of <span class="math-container">$0.5$</span>, the orange one <span class="math-container">$2$</span> and the red one has constant elasticity of <span class="math-container">$5$</span> (all expressed in absolute value). You see as the elasticity increases the demand graph becomes more 'flat'.</p>
<p><a href="https://i.sstatic.net/JcBzf.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/JcBzf.png" alt="enter image description here" /></a></p>

CC BY-SA 4.0
2020-09-28T11:21:41.313Z
2020-09-28T12:34:22.100Z
2020-09-28T12:34:22.100Z
1muflon1
<p>The following question is on a quiz at Marginal Revolution University:
<a href="https://mru.org/practice-questions/calculating-elasticity-demand-practice-questions" rel="nofollow noreferrer">https://mru.org/practice-questions/calculating-elasticity-demand-practice-questions</a></p>
<blockquote>
<p>The elasticity of demand is 2.0. Is the demand curve relatively steep
or flat? Will a fall in price raise total revenue or lower it? Note:
we present the elasticity in terms of its absolute value.</p>
</blockquote>
<p>The official answer is &quot;relatively flat; raise total revenue&quot;.</p>
<p>I can't understand this; isn't it true that elasticity &gt; 1 means higher responsiveness of demand to changes in price?  And isn't 1.0 defined as neither steep nor flat, and anything above 1.0 being steeper?</p>
<p>I can understand that a fall in price will lead to a huge surge in demand, because of the high elasticity, and therefore more profits.</p>
<p>I missed another question on the quiz that, for me, should be explicable in terms of the same reasoning as above.</p>
<blockquote>
<p>The elasticity of demand is 1.1. Is the demand curve relatively steep
or flat? Will a fall in price raise total revenue or lower it? Note:
we present the elasticity in terms of its absolute value.</p>
</blockquote>
<p>Again, the official answer is &quot;relatively flat; raise total revenue&quot;.</p>

<elasticity><demand>
confusion regarding elasticity of a demand curve
David J.
# confusion regarding elasticity of a demand curve

(Asked by: username_0 on 2020-09-28)

The following question is on a quiz at Marginal Revolution University:
<https://mru.org/practice-questions/calculating-elasticity-demand-practice-questions>

> The elasticity of demand is 2.0. Is the demand curve relatively steep
> or flat? Will a fall in price raise total revenue or lower it? Note:
> we present the elasticity in terms of its absolute value.

The official answer is "relatively flat; raise total revenue".

I can't understand this; isn't it true that elasticity > 1 means higher responsiveness of demand to changes in price? And isn't 1.0 defined as neither steep nor flat, and anything above 1.0 being steeper?

I can understand that a fall in price will lead to a huge surge in demand, because of the high elasticity, and therefore more profits.

I missed another question on the quiz that, for me, should be explicable in terms of the same reasoning as above.

> The elasticity of demand is 1.1. Is the demand curve relatively steep
> or flat? Will a fall in price raise total revenue or lower it? Note:
> we present the elasticity in terms of its absolute value.

Again, the official answer is "relatively flat; raise total revenue".

**Tags:** elasticity, demand

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## 1 answers

### Answer by username_1 on 2020-09-28. Score: 2 | Accepted answer

It is correct that the higher the elasticity is the more flat the demand curve will be. A higher elasticity means that demand responds disproportionately more to change in prices. In fact an example of demand curve where elasticity $ | \epsilon| = \infty$ would be a flat horizontal demand curve.

The reason for this is that elasticity of demand tells you how much quantity demanded (plotted by convention on x-axis) changes in response to change in price (by convention plotted on y-axis). In order for a small price change (small distance 'traveled' across y-axis) to have large impact on quantity (distance 'traveled' across x-axis) the curve has to be relatively 'flat' since the slope which will be the rise/run of tangent line at a given point must be relatively small.

For example if elasticity $| \epsilon | = 2$ that means that $1\%$ decrease in price increases quantity demanded by $2\%$. Since total revenue is defined as price times quantity $P\*Q$ if $P$ decreases only by $1\%$ but $Q$ increases by $2\%$ the total revenue has to increase. So the answer provided is correct.

To actually showcase how the demand becomes more 'flat' I generated 3 constant elasticity of demand functions ($P=Q^{1/\epsilon}$) using R for natural numbers $Q = 1, ..., 10$. The blue demand curve has constant elasticity of $0.5$, the orange one $2$ and the red one has constant elasticity of $5$ (all expressed in absolute value). You see as the elasticity increases the demand graph becomes more 'flat'.

[![enter image description here](https://i.sstatic.net/JcBzf.png)](https://i.sstatic.net/JcBzf.png)


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