Published by: sadikshya

Published date: 28 Jun 2021

point method was introduced by Marshall. It is to consider a linear demand curve, generally, the method is used to measure the price elasticity of demand when there is a small change in the price of a commodity. When elasticity is measured at a different point of the demand curve, It is called point elasticity of demand. The point elasticity of demand can be obtained by using the following formula.

Point method of measuring price elasticity of demand can be illustrated by the help of the following figure:

In this figure, AB is a demand curve, which is assumed as 4 cm long and further supposes that the demand curve AB has been divided into four equal parts. In this situation, the PM can be measured by the elasticity of demand for different parts as explained below.

- EP at point P=PA/PB=2/2=1 (Elasticity of demand equal to unity)
- EP at point P2 =P2 B/ P2 A=3/1=3 (Elasticity of demand greater than unity)
- EP at point P1=P1B/P1A=1/3=0.33 (Elasticity of demand less than unity)

According to K.E.Boulding “the elasticity of demand may be defined as the percentage change in the quantity demand which would result from 1 percentage change in its price”.