Cambridge International as and a level Economics Ebook

Figure 2.8 
Price elastic and price inelastic demand curves
Income elasticity of demand
YED provides information on how the quantity demanded 
varies with a change in income. It is potentially of 
great importance for businesses and for governments 
Th
e market demand schedule in 
Table 2.7
 was previously used to show how the PED varied along the length of a 
linear demand curve. Th
is demand curve is now shown again in 
Figure 2.9
. (Remember how in the top half PED > 1 
whereas in the lower half PED was <1).
Price of 
product R 
(US$/unit)
Quantity demanded 
of product R (units 
per week)
Total 
expenditure 
US$ per week
10
0
9
1,000
8
2,000
7
3,000
6
4,000
5
5,000
4
6,000
3
7,000
2
8,000
1
9,000
0
10,000
Table 2.7
SELF-ASSESSMENT TASK 
2.11
Price (US$)
5000
10
9
8
7
6
5
4
3
2
1
0
Quantity demanded
D
Figure 2.9 
The demand curve for product R
51
Chapter 2: The price system and the microeconomy 

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1 a
Use 
Table 2.7
 to help you calculate the total 
revenue fi gures and graph the resulting values 
underneath the demand curve (put total 
revenue on the vertical axis and quantity on the 
horizontal axis – it will help if you use the same 
scale on the horizontal axis).
b
What do you notice about the total revenue fi gures 
as the price is cut from $10 towards $5 per unit?