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Ackbar Group Title

What is the difference between elastic and inelastic demand?

  • 2 years ago
  • 2 years ago

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  1. LeoMessi Group Title
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    Right, a fundamental question ;) Let's first draw Supply and Demand graphs

    • 2 years ago
  2. LeoMessi Group Title
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    |dw:1330488154668:dw|

    • 2 years ago
  3. LeoMessi Group Title
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    Price is on the the Y-axis, and Quantity is on the X-axis. This is the basic concept

    • 2 years ago
  4. Ackbar Group Title
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    sure, yeah, i get that

    • 2 years ago
  5. LeoMessi Group Title
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    Elasticity of demand is concerned with how the demand curve changes given changes in price. \[\Delta demand / \Delta price\]

    • 2 years ago
  6. LeoMessi Group Title
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    |dw:1330488876988:dw| at price P1, Q1 is demanded of the good we're considering

    • 2 years ago
  7. LeoMessi Group Title
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    |dw:1330488933838:dw| now if P1 increases to P2, the quantity demanded decreases to Q2 here

    • 2 years ago
  8. LeoMessi Group Title
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    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
  9. Ackbar Group Title
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    In between?

    • 2 years ago
  10. LeoMessi Group Title
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    Yes, so|dw:1330489138203:dw|

    • 2 years ago
  11. LeoMessi Group Title
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    I'll just use this graph as a baseline so i can show you changes more easily

    • 2 years ago
  12. LeoMessi Group Title
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    |dw:1330489205506:dw| perfectly elastic demand is a horizontal demand curve. When the price changes, the demand essentially drops to 0

    • 2 years ago
  13. LeoMessi Group Title
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    |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
  14. LeoMessi Group Title
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    |dw:1330489585257:dw| Here you have Inelastic demand, what do you think happens when the price increases?

    • 2 years ago
  15. Ackbar Group Title
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    ah, ok, easy to see! an increase in price wouldn't change demand, Q1 would still be demanded

    • 2 years ago
  16. LeoMessi Group Title
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    Exactly, seems like this helped ;)

    • 2 years ago
  17. joycechee Group Title
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    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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