Point Elasticity for Quadratic Demand Function

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POINT ELASTICITY FOR QUADRATIC DEMAND FUNCTION

The quadratic demand function is

Qd = 60 – 15P + P2

Assume different values of price e-g from 0 to 10. Put these values in this equation and find out the quantity demand. Here we take price from 0 to 3.

P

60

-15P

P2

QD:60-15P+P2

0

60

0

0

60

1

60

-15

1

46

2

60

-30

4

34

3

60

-45

9

34

Then draw a figure, plot prices on vertical axis and quantity on horizontal axis. The resulting curve will be downward sloping curve.

To find the point elasticity of demand from this quadratic equation, differentiate it with respect to price,

Qd = 60 – 15P + P2

dQ/dP = -15 + 2P

IF P=3 then

dQ/dP = -15 + 2(3)

= -15 + 6

= -9

And

Qd = 60- 15(3) + (3)2

= 24

The formula of elasticity = (dQ / dP) (P/Q)

= -9 (3/24)

= -1.125

Its absolute value (ignoring minus sign) is greater than one so it is point elastic. Virtual University

One Comment

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