Anonymous

# economics: elastic vs perfectly elastic?

what's the difference between the two and

if there are two values (price, quantity) : (70,100) (100,100) how do you calculate elasticity since you would be dividing by zero.

(30/85) / ( 0/100)

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• Anonymous

Inelastic demand means that the percentage change in price is more than the percentage change in quantity demanded, so the elasticity will be less than 1. For example foods. When producer raises the price, the quantity demanded will decrease less than price, so the producer's revenue increases. On the contrary, when demand is elastic, an increase in price will cause revenue to fall, so the elasticity will be more than 1.

No, you cann't calculate elasticity unless you know how many percentage the price and quantity have changed. Only in the case of perfectly conpetitive market where the demand curve is parallel to the horizontal axis. The price does not change. So the percentage change in quantity will be divided by 0, the value in infinity.

• This is an example of being perfectly INelastic--when the price changes, the quantity doesn't change at all.

Inelastic: the change in quantity is less drastic than the change in price; this is something like gas that people can't NOT buy (but they can cut down a little), and that there are no substitutes for.

Perfectly inelastic: the quantity doesn't change at all, regardless of change in price. I don't think there's really any good that's perfectly inelastic. The only example I can think of is if you had to pay for air. You would have no choice but to buy it or else you would die, so you would buy the same amount no matter what the price.

Source(s): I remember this from econ class.
• Elasticity is quantity divided by price, so it's not division by 0.

(0/100) / (30/85)

=0

So the curve is perfectly elastic.