In this article will update you about the relationship between price consumption curve and price elasticity of demand.

It is possible to determine whether an individual’s demand curve for a commodity is elastic, unitary elastic or inelastic directly from the slope of the PCC. We know that the PED (Ep) is given by the percentage change in the quantity demanded of a good divided by the percentage change in its price, a, at par.

Demand is said to be elastic, unitary elastic or inelastic depend­ing on whether Ep exceeds 1, is equal to 1, or less than 1, respectively. This can be determined directly from the shape of the PCC. To be more specific, the demand curve is elastic, unitary elastic or inelastic depend­ing on whether the PCC falls, is horizontal or rises.

We can show this with Fig. 10. The horizontal axis in each part of the diagram measures the quantity of good X purchased per pe­riod (as usual). But, instead of measuring the quantity of good Y along the vertical axis, we now measure money spent on all goods other than X.