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Sunday, April 18, 2010

The degrees of the elasticity

we know tat the elasticity falls as we move don the demand curve, the demand elasticity of -1 can be used as an important diving line.Accordingly m demand is elastic if the price elasticity in more negative than -1.
Demand inelastic if the price elasticity lines between -1 and 0.
If the price elasticity is exactly -1, the demand in unit elastic.
In fact,,,
the elasticity equation is further illustrated by five demand curves which distinguish the various degrees of elasticity .

1.The elasticity of the completely vertical demand curve (a) is zero because the quantities demanded is completely uneffected by price.
2.the elasticity of the completely horizontal demand curve (e)is infinitely large because even the smallest sdrop in price would result in an unlimited increase in sales.
3. In the intermediate case (c) , quantity increases at the same rate as price falls , and the elasticity is -1 .
4.the flatter the curve , the more elastic it is.
Also m if two demand curves pass through the same point,the flatter one is the more elastic .
Thus , the demand curve (d) is more elastic then the demand curve (b).

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