Authors libby rittenberg 248

means that even the smallest price changes have enormous effects on
quantity demanded. The denominator of the formula given in Equation
5.2 for the price elasticity of demand (percentage change in price)
approaches zero. The price elasticity of demand in this case is therefore
infinite, and the demand curve is said to be perfectly elastic. [2] This is the
type of demand curve faced by producers of standardized products such as
wheat. If the wheat of other farms is selling at $4 per bushel, a typical farm
can sell as much wheat as it wants to at $4 but nothing at a higher price
and would have no reason to offer its wheat at a lower price.
The nonlinear demand curves in Panels (c) and (d) have price elasticities
of demand that are negative; but, unlike the linear demand curve discussed
above, the value of the price elasticity is constant all along each demand
curve. The demand curve in Panel (c) has price elasticity of demand equal
to −1.00 throughout its range; in Panel (d) the price elasticity of demand is
equal to −0.50 throughout its range. Empirical estimates of demand often
show curves like those in Panels (c) and (d) that have the same elasticity at
every point on the curve.

Heads Up!
Do not confuse price inelastic demand and perfectly inelastic demand.
Perfectly inelastic demand means that the change in quantity is zero for
any percentage change in price; the demand curve in this case is vertical.
Price inelastic demand means only that the percentage change in quantity
is less than the percentage change in price, not that the change in quantity
is zero. With price inelastic (as opposed to perfectly inelastic) demand, the
demand curve itself is still downward sloping.

Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org

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