Unformatted text preview: An elasticity of 1 is the established borderline between elastic and inelastic goods. A curve with an elasticity of 1 is called unit elastic; an elasticity of 1 indicates perfect responsiveness of quantity to price; that is, in a unit elastic supply curve, a 10% increase in price yields a 10% increase in quantity; a unit elastic demand curve will have a decrease in quantity of 10% with a price decrease of 10%. If the elasticity of demand is greater than or equal to 1, meaning that the percent change in quantity is great than the percent change in price, then the curve will be relatively flat and elastic: small price changes will have large effects on demand. If the elasticity of the demand curve is less than 1, meaning the percent change in quantity is less then the percent change in price, then the curve will be steep and inelastic: it will take a big...
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This note was uploaded on 12/13/2011 for the course ECO 1320 taught by Professor Staff during the Fall '11 term at Texas State.
- Fall '11