MKTG 431 Lecture 4: price elasticity
Document Summary
Elastic demand: decrease in price is met with an increase in demand. The relationship is represented in the graph below. A perfectly elastic demand is represented by the following graph: The demand keeps increasing based on a constant price. The converse of this scenario is when quantity demanded is constant as price increases. This would be a perfectly inelastic product and is represented by the graph below (as we discussed these would include products that are essential and are not easily replaced). The price elasticity of demand is calculated using the following formula: Therefore a value of zero for ed represents a perfectly inelastic demand. A value between 0 and 1 is usually considered inelastic demand. When the percentage change in the price of the product is met with an equal percentage decrease in quantity demanded then we call this a unitary demand. When ed has a value between 1 and infinity then we say that conditions of elasticity exist.
