# 5.2 Polar cases of elasticity and constant elasticity

 Page 1 / 11

By the end of this section, you will be able to:

• Differentiate between infinite and zero elasticity
• Analyze graphs in order to classify elasticity as constant unitary, infinite, or zero

There are two extreme cases of elasticity: when elasticity equals zero and when it is infinite. A third case is that of constant unitary elasticity. We will describe each case. Infinite elasticity or perfect elasticity    refers to the extreme case where either the quantity demanded (Qd) or supplied (Qs) changes by an infinite amount in response to any change in price at all. In both cases, the supply and the demand curve    are horizontal as shown in [link] . While perfectly elastic supply curves are unrealistic, goods with readily available inputs and whose production can be easily expanded will feature highly elastic supply curves. Examples include pizza, bread, books and pencils. Similarly, perfectly elastic demand is an extreme example. But luxury goods, goods that take a large share of individuals’ income, and goods with many substitutes are likely to have highly elastic demand curves. Examples of such goods are Caribbean cruises and sports vehicles.

Zero elasticity or perfect inelasticity    , as depicted in [link] refers to the extreme case in which a percentage change in price, no matter how large, results in zero change in quantity. While a perfectly inelastic supply is an extreme example, goods with limited supply of inputs are likely to feature highly inelastic supply curves. Examples include diamond rings or housing in prime locations such as apartments facing Central Park in New York City. Similarly, while perfectly inelastic demand is an extreme case, necessities with no close substitutes are likely to have highly inelastic demand curves. This is the case of life-saving drugs and gasoline.

Constant unitary elasticity , in either a supply or demand curve, occurs when a price change of one percent results in a quantity change of one percent. [link] shows a demand curve with constant unit elasticity. As we move down the demand curve from A to B, the price falls by 33% and quantity demanded rises by 33%; as you move from B to C, the price falls by 25% and the quantity demanded rises by 25%; as you move from C to D, the price falls by 16% and the quantity rises by 16%. Notice that in absolute value, the declines in price, as you step down the demand curve, are not identical. Instead, the price falls by \$3 from A to B, by a smaller amount of \$1.50 from B to C, and by a still smaller amount of \$0.75 from C to D. As a result, a demand curve with constant unitary elasticity moves from a steeper slope on the left and a flatter slope on the right—and a curved shape overall.

Unlike the demand curve with unitary elasticity, the supply curve with unitary elasticity is represented by a straight line. In moving up the supply curve from left to right, each increase in quantity of 30, from 90 to 120 to 150 to 180, is equal in absolute value. However, in percentage value, the steps are decreasing, from 33.3% to 25% to 16.7%, because the original quantity points in each percentage calculation are getting larger and larger, which expands the denominator in the elasticity calculation.

Consider the price changes moving up the supply curve in [link] . From points D to E to F and to G on the supply curve, each step of \$1.50 is the same in absolute value. However, if the price changes are measured in percentage change terms, they are also decreasing, from 33.3% to 25% to 16.7%, because the original price points in each percentage calculation are getting larger and larger in value. Along the constant unitary elasticity supply curve, the percentage quantity increases on the horizontal axis exactly match the percentage price increases on the vertical axis—so this supply curve has a constant unitary elasticity at all points.

## Key concepts and summary

Infinite or perfect elasticity refers to the extreme case where either the quantity demanded or supplied changes by an infinite amount in response to any change in price at all. Zero elasticity refers to the extreme case in which a percentage change in price, no matter how large, results in zero change in quantity. Constant unitary elasticity in either a supply or demand curve refers to a situation where a price change of one percent results in a quantity change of one percent.

## Problems

The supply of paintings by Leonardo Da Vinci, who painted the Mona Lisa and The Last Supper and died in 1519, is highly inelastic. Sketch a supply and demand diagram, paying attention to the appropriate elasticities, to illustrate that demand for these paintings will determine the price.

Say that a certain stadium for professional football has 70,000 seats. What is the shape of the supply curve for tickets to football games at that stadium? Explain.

When someone’s kidneys fail, the person needs to have medical treatment with a dialysis machine (unless or until they receive a kidney transplant) or they will die. Sketch a supply and demand diagram, paying attention to the appropriate elasticities, to illustrate that the supply of such dialysis machines will primarily determine the price.

prove or disprove that balance of trade of trade deficit is a cause of an abnormal demand curve?
what's the fixed cost at output zero
fixed cost stay the same regardless of the level of output
Luka
what are the differences between change in demand and change in quantity demand
what is consumers behaviour
importance of income
Tfor settlement of debt. For purchases. For payment of bills. For daily transactions. For social & recreational enjoyment. For business purposes etc
Oyetunde
thanks
Emmanuel
For investment purposes For security purposes For purpose of forecasting & strategizing.
Oyetunde
what is the real definition of economics
Economics is the study of the use and allocation of (scarce) resources
demsurf
Jegede, what is the "non" real definition of economics then?
Ernest
Economics is a study of how human use limited resources to fulfil their unlimited want
Musa
the study of how a society use scarce factors of production efficiently so as meet aggregate social demand
Marc
what is oligopoly?
Sailo
Oligopoly can be defines as a market where by there is only tmo or more sellers of a commodity
Paamat
Sory not tmo but two
Paamat
incidence of production there is a choice do you agree? justify
What is incidence of production? do u mean incidence of tax?
Aryeetey
I want to know about Richard lipsey and robin as the economist and their definition proposed by them
what are the causes of scarcity And what are the goal scarcity
Musa
scarcity only exist because human wants are unlimited...if human just know how to be contented then scarcity will not exist
Ylaine
what is ment by possibility curve
Ruzaiq
define accounting?teatly
Is the recording, classifying, interpreting record of all transaction
Yuusuf
is still the act of measuring, interpreting and communicating of financial issues
Yuusuf
Zeyi
Accounting is the process of collecting,recording,classifying,summarizing and interpreting/presenting financial data to the stakeholders for their economic decision making
asri
hi
Otilina
hi
AVIAH
wat is PPC
ALLAJI
what are the different between need and wants
the major difference is necessity
Yuusuf
explain any four tool of monetary policy to solve the problem of inflation.
bank rate,open market operation,legal reserve requirement
Johnson
what's marginal utility?
the additional utility you get if you can consume one more unit of the good x
Luka
Thanks... then what's the law of diminishing marginal utility ?
Abena
The utility decreases with every unit you consume (most of the time). The first unit of consumption will therefore give you the highest utility. Sorry about my english
Luka
Okay... I understand now
Abena
Great!
Luka
hello room
Lawal
one of the leading industrial nations of the world ranking second in manufacturing output after the USA is a. Russia b. Germany c. Britain d. Japan
Lawal
china
Siddharth
japan
Siddharth
good morning
Lamin
hi
Rafiu
hi
nivedha
japan
Ylaine
morning
no other questions?
Ylaine
hii
Dipun
I am from India
Dipun
same question are not mentioned
Dipun
Dipun
hi
welcome
Ahmed
dipun naik
Ahmed
I am from India
Dipun
retype the questions
marginal untility is the last point desire of a consumer that gets benefit from related good/ service.
Saboor
Why are some countries rich and why are some countries poor? . is poorness a human cause?
Yacquub
well several factors are included...it's not just because of human..
Ylaine
what is a correct reason
Vijay
Japan
Lawal
countries which are rich they are developed countries they have good resources minerals technology power knowledge to use the resources poor countries are under developing countries they have lack of resources, knowledge and if they have these so they dont know the use of these resources.
Siddharth
so these knowledgeable people move /migrate to the other rich/developed countries
Siddharth
Poverty of a country is also related to cultural, economical, and military domination. Usually, the dominant country imposes all of these powers when diplomatically needed or sometimes by force.
Ernest
You can also have considerable poverty in a rich country when such poverty is measured within sectors of its population. In other words, economic indicators can sometime mask such poverty.
Ernest
For example, the U.S.A. has a very high measure of GDP per capital, but millions of Americans ( a considerable amount are children) live in poverty.
Ernest
So poverty is not an easy social phenomenon to pin down neatly into one social realm or another.
Ernest
pls what is price ceiling
jasmine
its the max price a seller can charge for a product, mostly imposed by the government to protect the consumer
Luka
its the max price a seller can charge for a product, mostly imposed by the government to protect the consumer plus it must be imposed below the equilibrium price in order to be effective. A shortage will also be created after its imposition.
Zafar
can happiness be measured?
Ylaine
Happiness is too subjective to be measured as an economic phenomenon or reality. I think that happiness happens at several levels of the human condition: biological, psychological, intellectual and at the level of the soul. How can economic theory be scientific about it?
Ernest
Ylaine
Germany
Arthur
what's Neo classical definition of economic
Mohammed
hi
ALLAJI
economic is a social science studied as a relationship between end and needs scarce which have alternative uses
ALLAJI
what's equilibrium
Daniel
What is economies of scale
In microeconomics, economies of scale are the sum of total costs saved or that a firm has advantage over its competitors due to its scale of operations. More specifically, it is the firm's cost savings per unit of output that it gains as its production increases in scale.
Ernest
one of the leading industrial nations of the world ranking second in manufacturing output after the USA is ......... a. Russia b. Germany c. Britain d. Japan
Lawal
what is supply of demand?
supply of demand?
Yuusuf
how can tell me about the GDP
Mahmood