Week 4: Interactive Visualizations

Fig 4.1 Elasticity Meter: Point vs Arc

Drag either point along the demand curve. Point elasticity measures responsiveness at a single location using the formula e = −b·P/Q. Arc (midpoint) elasticity measures responsiveness between two points using the midpoint formula. Toggle between modes to compare how the two methods diverge as the gap between points widens.

Mode:

Fig 4.2 Elasticity Heatmap: Living Demand Curve

The demand curve is shaded as a continuous gradient: red at the top (elastic, |e|>1), amber at the midpoint (unit elastic, |e|=1), and blue at the bottom (inelastic, |e|<1). Drag the yellow dot to any point and read off its exact elasticity. Type your own linear demand equation below to reshape the curve.

Enter demand equation (format: Q = a − bP)

Q = − P

Fig 4.3 Revenue Rectangle: Price vs Quantity Effect

Total revenue equals the area of the rectangle P×Q. When price rises, the red strip shows revenue gained from existing buyers paying more; the green strip shows revenue lost from buyers who leave. The live verdict tells you which effect dominates. Set the old price, pick the new price, and adjust the demand slope to explore.

Old price P_old: $25

New price P_new: $35

Demand slope b: 2.0

Fig 4.4 Pricing Strategy Simulator

Select an industry with its real-world empirical elasticity estimate. Then adjust the price change and see the predicted change in total revenue. Uses the approximation %ΔTR ≈ %ΔP × (1 + e_d).

Industry:

%ΔP: +10%

Fig 4.6 Consumer Surplus Triangle

Consumer surplus (CS) is the area of the triangle between the demand curve and the market price. Use the first slider to set the initial price, then raise it with the second slider to see how CS shrinks, decomposed into the rectangle (existing buyers now paying more) and the exit triangle (buyers priced out of the market). Click Show Calculation to see the step-by-step formula.

Base price P*: $15

New price P': $25

Fig 4.7 Surge Pricing Simulator

Ride-share surge pricing in action. As the surge multiplier rises, rider demand falls, consumer surplus shrinks, and Uber's revenue grows - up to a point. Riders priced out exit the market entirely. This illustrates the welfare trade-off between producer revenue and consumer surplus.

Surge price: $5.00

Fig 4.8 Market Demand: Horizontal Aggregation

The market demand curve is the horizontal sum of individual demand curves. The animation below shows Consumer 1 (Q = 30 − P, choke price $30) and Consumer 2 (Q = 24 − 2P, choke price $12). Starting from a high price and moving down, watch each consumer enter the market and see how the kink forms when Consumer 2 begins buying.

Playback speed:

Consumer 1 Q = 30 − P

Consumer 2 Q = 24 − 2P

Market Demand Q_m(P)

Price P: $20

Market Demand Formula by Price Range

P > $30:Q_m = 0 (neither consumer buys; choke price of Consumer 1 not yet reached)

$12 < P ≤ $30:Q_m = 30 − P (Consumer 1 only; Consumer 2's choke price $12 not yet reached)

P ≤ $12:Q_m = (30 − P) + (24 − 2P) = 54 − 3P (both consumers buy; sum of demand curves)

The choke price is the price at which a consumer's demand falls to zero. Consumer 1: choke price = $30 (sets 30 − P = 0). Consumer 2: choke price = $12 (sets 24 − 2P = 0).

Builder Build Your Own Market Demand

Type your own demand equations below. Enter each consumer's demand in the form Q = a − bP. The market demand curve builds itself as the horizontal sum. The functional form at different price ranges appears at the bottom.

Consumer 1 Q = − P

Consumer 2 Q = − P

Elasticity & Consumer Welfare