One thing that makes a difference in these four examples is the strength of the response when there is a change in price. In two cases a drop in price causes a big increase in quantity sold, and in the other two cases the response, the increase in quantity sold, is small. This is what we want to understand.
A key concept for this purpose is the price elasticity of demand. Elasticity of demand is
Elasticity of demand is a measure of how strongly the quantity demanded responds to a change in price.
Noticing that
We can see that the elasticity is related to the slope (and the derivative) but is not quite the same as the slope of the demand curve. What we are doing is measuring the change in price and the change in quantity sold each in percentage terms. This is helpful for several reasons, as we will see. For one thing, it means that the elasticity is independent of the units of measurement of price and quantity.
