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Difference Between Slope and Elasticity

Slope vs Elasticity

Economics can somewhat become complicated. If you just know the basic idea of a particular concept, then everything else can easily be learned and will follow after that. You can take, for example, the concepts of elasticity and slope. In a graphical analysis, these two concepts can refer to many things because elasticity can refer to supply elasticity, income elasticity, price elasticity of demand, and other forms.

When talking about the latter, price elasticity of demand is present if there’s significant rebound in the consumers’ demand after a certain percentage increase in the price of a certain commodity or service. In the example of increasing the price (by 10 per cent) of an ice cream scoop from $1 to $1.1, elasticity answers how much the decline in demand has become. If the demand for the ice cream decreases by more than ten per cent, then there is elastic demand, but if it’s less than that, then there is inelastic demand.

Inelastic demand occurs when the normal demand is, for example, 100 scoops. Then the new demand after the price increase becomes 95 scoops. Elastic demand happens when the demanded scoops becomes 40 instead of the original 100. Clearly, 40 scoops is a very significant decrease in demand. That’s more than ten per cent in overall decline. The formula for price elasticity of demand is Variable X (per cent change in demanded quantity) over variable Y (per cent change in price). Often the numerator (X) is negative while the denominator (Y) is positive resulting in a negative price elasticity of demand.

Comparing slope and elasticity is best explained with reference to the demand curve – a display of the demand schedule that correlates two variables (one in a horizontal axis and the other in a vertical axis): the price of a product or service and the amount of demand (in terms of quantity) that the buyers are willing to purchase given the price. Using the demand curve, the slope is different from the price elasticity of demand because it is now equal to the Variable A – price change over Variable B – change in demanded quantity. This shows that the variables of demand quantity and price are interchanged in the two concepts of slope and price elasticity of demand. So being inversely proportional, when one of the two (either slope or elasticity) is small, the other tends to become big and vice versa.

Summary:

1.In the computation for the slope, the price is in the numerator while the demand or quantity is in the denominator.
2.In the computation for elasticity (as in the case of price elasticity of demand), the numerator has the quantity while the denominator has the price.
3.Elasticity is computed using a percentage change so the quotient is unitless.
4.Slope is computed using the units for quantity and price (i.e. how many dollars per scoop of ice cream).

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