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a relatively steep demand curve

indicates that consumers respond hardly at all to price changes. inelastic. in this graph, a ten dollar price rise cuts quantity demanded only by 1 unit, instead of 2.5 units as in the example above (4)

A relatively flat demand curve

indicates that consumers respond sharply to a change in price-the quantity they demand falls by 2.5 units. when prices raise by ten dollars. that is they demand or buy much less of the product when prices rises even a little bit. such a "touchy" curve is elastic or highly elastic

completely vertical demand curve

, called perfectly inelastic throughout because its elasticity is zero at every point on the curve. bc quantity demanded remains at 90 units no matter the price, the percentage change change in quantity is always zero, and hence the elasticity (which equals percentage change in quantity divided percentage change in price is always zero. In this case, consumer purchases do not respond at all to any change in price. occur when a commodity is very inexpensive, ex probs won't buy any more rubber bands if their prices fall. may also occur when an item is an absolute necessity

price elasticity of supply:

to measure the response of quantity supplied to a change in price, we use the price elasticity of supply-defined as the ratio of the percentage change in quantity supplied to the percentage change in price for example, by what percent the supply of wheat increases when the price (At the time of planting) goes up, say, by 7 percent.

a demand curve is unit-elastic

when a given percentage price change leads to the same percentage change in quantity demanded elasticity is exactly 1

cross elasticity of demand:

which measures how much the demand of product x is affected by the change in price of product y

a demand curve is elastic when

a given percentage price change leads to a larger percentage change in quantity demanded. elasticity greater than 1

a demand curve is inelastic when

a given percentage price change leads to a smaller percentage change in quantity demanded. elasticity is less than 1.

seemingly straight-line demand curve (seemingly simple)

between two extremes above. Doesn't run neither vertically nor horizontally, slope remains constant throughout its length, its elasticity doesn't.

price elasticity of demand

change in quantity demanded, expressed as a percentage of the average of the before and after quantities divided by the corresponding percentage changes in price.

Horizontal demand curve.

This is called perfectly elastic (or infinitely elastic) at any price higher than $.75, quantity demanded will drop to zero., that is comparative change in quantity demanded will be infinitely large. Perfectly elastic typically occurs when many producers sell a product and consumers can switch can switch easily from one seller to another if any particular product raises the price. This situation is likely to prevail whenever an accessible rival product is available at the going price. In cases in which no one will pay more than the going price, the seller will lose all of her customers if she raises her price by a penny

unit elastic demand curve

curve with elasticity equal to 1 throughout. it bends in the middle middle toward the origin of the graph- at each end, it moves closer and closer to the axes but never touches them or crosses them.

the cross elasticity of demand

for product x to a change in the price of another product, y, is the ratio of the percentage change in quantity demanded of x to the percentage change in price of y that brings about the change in quantity demanded. used to choose if two products are compliments or substitutes. how quantity demanded of one good (coffee) responds to a change in the price of another good, sugar.

two goods are called substitutes

if an increase in the quantity consumed of one cuts the quantity demanded of the other, all other things remaining constant. some goods make other goods less valuable. ownership of a motorcycle decreases desire for a bike. when the price of motorcycles falls, people desire fewer bikes, so quantity of bikes demanded falls while that of motorcycles rises.

two goods are called complements

if an increase in the quantity consumed of one increases the quantity demanded of the other, all other things remaining constant. one makes the other more valuable. rise in coffee price reduce demand of sugar.

The price elasticity of demand

is the ratio of percentage change in quantity demanded to the percentage change in price that brings about the change in quantity demanded.

Income elasticity of demand

is the ratio of the percentage change in quantity demanded to the percentage change in income.