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This applet illustrates the concepts of demand and elasticity, and gives an example of a practical application of these concepts. The revenue from the sales is maximal at the point where the direct elasticity of demand equals 1.

Choose available goods from the given list (every good has a corresponding demand curve). You may also alter a demand curve manually. The upper graph is the demand curve for a given commodity, whereas the lower graph stands for the relationship between revenue and demand.

The upper graph contains three highlighted rectangles. The sum of areas of yellow and pink rectangles is equal to maximal revenue. Areas of blue and pink rectangles stand for the amount of loss and gain in revenue, respectively, when the set price is other than the optimal price.

© OpenTeach Software, 2007