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Inelastic Demand

Demon in elastic pants
Picmonic

Topic Overview

 

Often, it is necessary to assess the level of elasticity of demand. Elasticity is the

measurement of how changing one variable, like price, affects others, like quantity

demanded. In order to calculate it, you can use the price elasticity of demand, or

PED. It is the % change of quantity divided by the % change in price.

 

Because elasticity is almost always negative, values are expressed as positive

numbers. If the PED is found to be greater than 1, demand is elastic. If the PED is

founded to be between 0 and 1, demand is inelastic. If demand is equal to 1, it is

unit-elastic.

 

Elasticity is a very important concept in economics because different goods and

services in the market have different levels of elasticity. When demand for a good/service is inelastic, if the price increases, very few people would stop purchasing it, or at least the effect is not as great as for more elastic goods/services.

 

Because price elasticity of demand is the % change in quantity over % change in

price, depending on the location of the demand curve, elasticity changes. When

comparing two demand curves on the same graph, the steeper curve overall has a

less elastic demand. In the case of perfectly inelastic demand, the demand curve will

be vertical.

 

CREATIVE AUDIO

 

This straight faced demon in elastic pants has grown tired of his guests wild antics.  Hes less than amused by this atomic wedgie, as such a steep stretch will certainly ruin his favorite pants.  The queen and prince have both changed since he saw them last.  The change in the queen is less apparent, being only a newfound sense of humor at the demons expense.  But the prince has changed quite literally in a larger way, growing fat over the years.  Unfortunately, the Princes larger stature allows him to easily hold the skinny queen over himself, a position most advantageous for atomic wedgies.  

 

 

Classic Audio

Price elasticity of demand, or PED, is a measure in economics that measures the elasticity of demand, the demon, or otherwise demand’s responsiveness to changes in price.

It is calculated by taking the % change in quantity, the queen, over the % change in price, the big prince. Demand is inelastic when the PED is less than 1 in absolute value. This means that the % change of quantity is smaller than the % change in price. That’s why the queen is so much smaller than the prince.  When comparing two demand curves on the same graph, the steeper curve overall has a more inelastic demand. In fact, in the case of perfectly inelastic demand, the demand curve will be vertical, just like poor demon being hung by his stiff pants.

5 KEY FACTS
Change in quantity over change in price
Queen on top of the prince

This coefficient measures the price elasticity of demand to determine if demand is elastic or inelastic

Quantity
Queen

The amount of a given good or service.

Price
Prince

How much a given good or service costs.

Change in quantity < change in price
Skinny queen on the shoulders of the fat prince

When the demand curve is inelastic related to price, a one unit change in price has a lesser than one unit impact on quantity.

Steep demand curve
Elastic pants is stretched upwards

Inelastic demand curves are steeper than elastic demand curves

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