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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.

Infinite elasticity

Two graphs, side by side, show that perfectly elastic demand and perfectly elastic supply are both straight, horizontal lines.
The horizontal lines show that an infinite quantity will be demanded or supplied at a specific price. This illustrates the cases of a perfectly (or infinitely) elastic demand curve and supply curve. The quantity supplied or demanded is extremely responsive to price changes, moving from zero for prices close to P to infinite when price reach P.

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.

Zero elasticity

The two graphs show that zero elasticity of supply and zero elasticity of demand are straight, vertical lines.
The vertical supply curve and vertical demand curve show that there will be zero percentage change in quantity (a) demanded or (b) supplied, regardless of the price.

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.

A constant unitary elasticity demand curve

This graph shows how a demand curve with unitary elasticity at all points will always be a curved line.
A demand curve with constant unitary elasticity will be a curved line. Notice how price and quantity demanded change by an identical amount in each step down the demand curve.

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.

A constant unitary elasticity supply curve

This graph shows that a supply curve with unitary elasticity at all points will always be a straight line.
A constant unitary elasticity supply curve is a straight line reaching up from the origin. Between each point, the percentage increase in quantity supplied is the same as the percentage increase in price.

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.

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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.

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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.

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Questions & Answers

what is macroeconomic
ALIYU Reply
its the study of the interractions of the various components of economics as a whole
Kotey
please suggest me topic for research, about following issues 1. labor migration & economic growth 2. terrorism and trade 3. religious pessimism and trad
Fayaz Reply
state the law of diminishing returns.
Ronaxic Reply
the law diminishing returns states that as more and more units of variable factors of production(such as capital, labour) are combined with a fixed factor (such as land) after a certain point, the marginal product diminishes or declines
Vanessa
I would like to add one more point In the above statement. The addition of more variable factors of production will only leads to diminishing returns if the existing fixed capacity is fully utilised.
Ankit
hi
Yaqub
hey
Kotey
am joining here for the first time
Yaqub
is this open for any question in economic
Yaqub
yes i guess so
Kotey
what is diminishing marginal utility
Ronaxic Reply
with more units of consumption of a same commodity you will feel less satisfied with every next commodity. if you are thirsty you purchase a bottle of Coca-Cola and drink it, you will be satisfied at the same time again you drink another bottle of Cola you will be less satisfied in comparison.
Ankit
utility nothing it is just a measurement of your satisfaction.
Ankit
and diminishes as long as you consume same commodity continuously
Ankit
what is taxation
K.visor Reply
levy paid by eligible individuals and companies to the government
Kingt
tax
Raji
A means by which governments finance their expenditure by imposing charges on citizens and corporate entities. Governments use taxation to encourage or discourage certain economic decisions.
Raji
a source of economic revenue in which working citizens pay levy which varies from one individual to the other.
Vanessa
monies paid by residents of a country to the government in which the residents benefit indirectly
Kotey
it's the government, looking for funding to create public goods and services so that everyone can be happy.
Sinethemba
why does the demand curve slop downward
Ronaxic
thanks
Ronaxic
why does the demand curve slop downward?
Ronaxic
the demand curve is nothing but a line which shows willingness to purchase a commodity or a thing.For example, if you want to purchase a Pepsi can you are willing to purchase 5 Pepsi cans if they are of $3 each. but if they are of $5 each you want to purchase only three of them.
Ankit
so at Higher prices you like to purchase less quantity that's why demand curve falls down words. but please note demand curve does not fall downwards always for inferior goods the rise up parts like a supply curve because at Higher prices you tend to purchase those goods more
Ankit
and at lower prices of inferior goods you tend to avoid them and relocate your Limited money to other goods.
Ankit
what is taxation?
jacob Reply
In simple term. Taxation can be defined as compulsory payment levy on company or individual by the government. It can be direct or indirect.
salawu
what is capital
K.visor
its nice
Belaisan
it's nice
Abdulwali
capital , it is a investment of money or assets which is invested before starting up of the business
Madhu
its nice
Belaisan
disadvantage of money
Bigdreamz Reply
it won't let you sleep
Ankit
Please any Ghanaian schooling at KNUST?
Prince Reply
combining factors of production is the role of
Richard Reply
the situation in economic where by a more valuable good is sold at a low price while less valuable good is sold at a higher price .how can we describe this situation in economic
Fung
price discrimination
Fayaz
deman and supply
Samim
price discrimination
Citizen
enterlrenure
Fayaz
you can take example of water and daimond. you can ask someone to choose anyone from above 1. to a person in a Sahara desert and 2. a girl in London. you will get your answer
Ankit
it depends upon the buyer's preference what he wants why he wants and what is the necessity of that product at current time.
Ankit
causes of high elasticity of demand
Onyango Reply
causes of high elasticity of supply
Onyango
what is optimazation
lepekola
what is trade offs
lepekola
A trade-off  is a situational decision that involves diminishing one quality, or property of a design in return for gains in other aspects.
Addin
what is indifference curve ?
abdullah
its represnted by the loops of points and gives same level of satisfaction
hisham
what is enterpreneurship
Kukoyi
Entrepreneurship is the talent, knowledge and willingness individual has to engage in an activity that can result in new kind of firm
Addin
what is the short run industry supply curves?
james
I think there' s a mistake. P = - 0.4 + 0.2Qs is the supply curve and not the demand curve. Am I correct?
Valeria Reply
Qs is quantity supplied
The
This is what I think
The
this eaquation is supply curve Qs=P-0.4 the relationship is positive when the price increase the Qs increase....
mukhtaar
since Qs is quantity supplied P= -0.4 + 0.2Qs =>P +0.4=0.2Qs =>P/0.2 + 0.4=Qs I made Qs the subject of the formula or equation. So your answer is correct
The
P = -0.4 + 0.2Qs is the same as P/0.2+0.4=Qs Price has a direct relationship with the quantity supplied i.e the higher the price the higher the quantity supplied. that is why it is +0.4(this is the quantity and it is postive) and P/O.2(is the price and it is positive).
The
For the demand equation let me give an example 0.2P-0.4=Qd. Here the P is postive(+0.2) and the quantity which is -O.4 is negative( because of the negative sign(-) there is an inverse relationship between price and quantity. For quantity demanded the higher the price the lower the quantuty.
The
It's how I understand it
The
0.2P-0.4=Qd. the equation is wrong because the price have direct ralationship Quantity demanded but the correct equation is-0.2P -0.4=Qd so the higher price the lower Quantity
mukhtaar
I think the relationship is inverse because of the negative sign(-)
The
ok You mean the price and quantity demanded should be negative(inverse relationship) for Qd and the price and quantity supplied should be postive(direct relationship) for Qs
The
thank you for the correction
The
yes because it got a positive gradient of +0.2
Michael
This is the mistake I found: "Since P is on the vertical axis, it is easiest if you solve each equation for P. The demand curve is then P = 8 – 0.5Qd and the demand curve is P = –0.4 + 0.2Qs. Note that the vertical intercepts are 8 and –0.4, and the slopes are –0.5 for demand and 0.2 for supply."
Valeria
dear price do not depend on quantity. rather quantity depends on price. so the equation should be Qty=0.2Px-0.4
Michael
please can someone generate supply equation for me
David Reply
ok
Detto
Qs=f(P,Pr,G,E,Z,Pf,)
The
where p is price, Pr is price of related goods, G is goals of a firm E is supplier's future expectation of prices,Z is other related factors, Pf is cost of factors of production.
The
I think it's wrong
The
if Qd=90-p Qs=90+p
The
the coefficient of price must be positive since supply curve is positively slopping
Kotey
yes
The
it's true. thank you
The
welcome
Kotey
ok
The
OK, thank you
David
no one can do that, you must determine the the key factors for the commodity, like price, income, prices of alternative commodity, and other factors, if you want the main equation, you must have 4 values, 2 values for each quantity and price, for one commodity
Chief
What is the acceptable definition of economic?
bilya Reply
The economics is the optimal use for the resources, this is general definition, but from my point view it is the production,
Chief
diagram of perfectly inelastic
Muhd Reply
this platform is okay
K.visor
chi-square test is used to test A. Analysis of variance B. Association between the qualitative variables C. Difference between means of two distribution drawn from the same population D. Difference between the means of two distribution drawn from different population
Syk Reply
the Answer Should Be D
Amanuel
Confirm?
Syk
A
Satyanarayana
The answers is D
Lawrence
Thank you
Syk
What is economic?
bilya
is the system that study the difference between resources and the growth population
Messi
Economics studies humanbehaviour as a relation between ends and scarce means which have alternative uses
Kotey
rigth .....but economic has different concepts
Messi
yes
Kotey

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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