English:
A diagram accompanying
Alfred Marshall
's original definition of
price elasticity of demand
. Captioned:
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The elasticity of demand can be best traced in the demand curve with the aid of the following rule. Let a straight line touching the curve at any point P meet Ox in T and Oy in t, then the measure of the elasticity at the point P is the ratio of PT to Pt.
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If PT were twice Pt, a fall of 1 per cent. in price would cause an increase of 2 per cent., in the amount demanded; the elasticity of demand would be two. If PT were one-third of Pt, a fall of 1 per cent. in price would cause an increase of 1/3 per cent. in the amount demanded; the elasticity of demand would be one-third; and so on. Another way of looking at the same result is this:—the elasticity at the point P is measured by the ratio of PT to Pt, that is of MT to MO (PM being drawn perpendicular to Om); and therefore the elasticity is equal to one when the angle TPM is equal to the angle OPM; and it always increases when the angle TPM increases relatively to the angle OPM, and vice versâ.