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Ackbar
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What is the difference between elastic and inelastic demand?
 2 years ago
 2 years ago
Ackbar Group Title
What is the difference between elastic and inelastic demand?
 2 years ago
 2 years ago

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LeoMessi Group TitleBest ResponseYou've already chosen the best response.2
Right, a fundamental question ;) Let's first draw Supply and Demand graphs
 2 years ago

LeoMessi Group TitleBest ResponseYou've already chosen the best response.2
dw:1330488154668:dw
 2 years ago

LeoMessi Group TitleBest ResponseYou've already chosen the best response.2
Price is on the the Yaxis, and Quantity is on the Xaxis. This is the basic concept
 2 years ago

Ackbar Group TitleBest ResponseYou've already chosen the best response.0
sure, yeah, i get that
 2 years ago

LeoMessi Group TitleBest ResponseYou've already chosen the best response.2
Elasticity of demand is concerned with how the demand curve changes given changes in price. \[\Delta demand / \Delta price\]
 2 years ago

LeoMessi Group TitleBest ResponseYou've already chosen the best response.2
dw:1330488876988:dw at price P1, Q1 is demanded of the good we're considering
 2 years ago

LeoMessi Group TitleBest ResponseYou've already chosen the best response.2
dw:1330488933838:dw now if P1 increases to P2, the quantity demanded decreases to Q2 here
 2 years ago

LeoMessi Group TitleBest ResponseYou've already chosen the best response.2
The demand curve hers is pretty much negatively linear (let's say 1 slope), so the elasticity is between that of perfectly elastic and perfectly inelastic.
 2 years ago

LeoMessi Group TitleBest ResponseYou've already chosen the best response.2
Yes, sodw:1330489138203:dw
 2 years ago

LeoMessi Group TitleBest ResponseYou've already chosen the best response.2
I'll just use this graph as a baseline so i can show you changes more easily
 2 years ago

LeoMessi Group TitleBest ResponseYou've already chosen the best response.2
dw:1330489205506:dw perfectly elastic demand is a horizontal demand curve. When the price changes, the demand essentially drops to 0
 2 years ago

LeoMessi Group TitleBest ResponseYou've already chosen the best response.2
dw:1330489375627:dw P1 increases to P2, but Demand only will "buy" the product at P1 and will only buy Q1 of the product. So the price increased and demand dropped, so that probably means that the consumer found another similar product to purchase
 2 years ago

LeoMessi Group TitleBest ResponseYou've already chosen the best response.2
dw:1330489585257:dw Here you have Inelastic demand, what do you think happens when the price increases?
 2 years ago

Ackbar Group TitleBest ResponseYou've already chosen the best response.0
ah, ok, easy to see! an increase in price wouldn't change demand, Q1 would still be demanded
 2 years ago

LeoMessi Group TitleBest ResponseYou've already chosen the best response.2
Exactly, seems like this helped ;)
 2 years ago

joycechee Group TitleBest ResponseYou've already chosen the best response.0
LeoMessi, by a change in the demand, I think you mean a change in the quantity demanded because the curve never shifts. So, are you saying that the slope or the derivative from the previous equilibrium point to the second point is negative? Just a little confused.
 2 years ago
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