ELASTICITY

AND

SUPPLY
AND

DEMAND CURVES

Two essential characteristics about elasticity and

demand and supply curve:

Elasticity is similarly related to slope.

Elasticity changes along straight-line demand

and supply curves.

Elasticity and Demand and Supply Curves

ELASTICITY DIFFERS FROM SLOPE

The sloping sharply the curve becomes at a given

point, the less elastic is supply or demand.

PERFECTLY INELASTIC
DEMAND CURVE

PERFECTLY ELASTIC
DEMAND CURVE
Elasticity and Demand and Supply Curves

PERFECTLY INELASTIC CURVE

- quantity does not respond to all in changes
in price. They are vertical curves.
E=0
PERFECTLY ELASTIC CURVE
- quantity responds immensely to changes
price. They are horizontal curves.

in

E=

Elasticity and Demand and Supply Curves

PRICE (PhP)

ELASTICITY SHIFTS ALONG STRAIGHT-LINE

CURVES

QUANTITY
ELASTICITY ALONG A DEMAND CURVE
Elasticity and Demand and Supply Curves

UNIT ELASTIC
- the percentage change in quantity equals
percentage change in price.

the

E=1

In the change of elasticity along a supply curve,

at the point on a straight-line supply curve that stops
the quantity axis, the supply is perfectly zero; it
becomes more elastic as you go out along the
supply curve.

Elasticity and Demand and Supply Curves

PRICE (PhP)

QUANTITY

ELASTICITY ALONG A SUPPLY CURVE

Elasticity and Demand and Supply Curves

Elasticity along a curve has the characteristics

from most to least elastic. These are:
1. Perfectly elastic: quantity responds immensely to
changes in price (E=).
2. Elastic: the percentage change in quantity is more
than the percentage change n price (E>1).
3. Unit elastic: the percentage change in quantity is
on a par as the percentage change in price (E=1).
4. Inelastic: the percentage change in quantity is
less than the percentage change in price (E<1).
5. Perfectly inelastic: quantity does not respond at
all in changes in price (E=0).
Elasticity and Demand and Supply Curves

SUBSTITUTION AND DEMAND

As a general rule, the more substitutes a good has, the
more elastic is its supply or demand. The number
substitutes a good has is affected by several factors such
as:
1. The longer the run, the more elastic is the goods
demand curve.
2. The less a good is an indispensable thing; the more
elastic is its demand curve.
3. The more specific the meaning of the good, the more
elastic the demand.
4. Demand for goods that stand for a bigger part of ones
budget are more elastic than demand for goods that
stand fir a small part of ones budget.
Elasticity and Demand and Supply Curves

SUBSTITUTION AND SUPPLY

Time plays such a primary role in establishing supply
elasticity. To stress the significance of time, economists
make out three time durations in relation to supply as
follows:
1. In the on the spot period, quantity supply is established,
so supply is perfectly inelastic.
2. In the short run, some substitution is attainable, for that
reason, the short run supply curve is to some extent
elastic.
3. In the long run, important substitution is achievable; the
supply curve changes into elastic.

Elasticity and Demand and Supply Curves