what does it mean to say that supply is unitary elastic?

Learning Objectives

• Explain and compare the graphs for the post-obit types of elasticities: elastic, inelastic, unitary, space, and zero

The language of elasticity can sometimes be confusing. We utilise the give-and-take elasticity to describe the belongings of responsiveness in economic variables. Nosotros also draw the responsiveness every bit (relatively) elastic or (relatively) inelastic. It gets worse. We tin can too describe elasticity equally perfectly elastic or perfectly inelastic. How to nosotros keep these different meanings understood? That is the purpose of this section.

We mentioned previously that elasticity measurements are divided into iii main ranges: elastic, inelastic, and unitary, respective to different parts of a linear demand curve.

Demand is described as elastic when the computed elasticity is greater than 1, indicating a high responsiveness to changes in price. Computed elasticities that are less than 1 indicate low responsiveness to price changes and are described every bit inelastic demand. Unitary elasticities indicate proportional responsiveness of  demand. In other words, the pct alter in quantity demanded is equal to the percent modify in price, then the elasticity equals 1. These ranges are summarized in Tabular array 1, below.

Table one. Three Categories of Elasticity: Elastic, Inelastic, and Unitary
If . . .	Then . . .	And It'due south Called . . .
% change in quantity > % alter in price	Computed Elasticity > i	Elastic
% modify in quantity = % change in price	Computed Elasticity = i	Unitary
% alter in quantity < % change in price	Computed Elasticity < 1	Inelastic

Information technology is important to note that both elastic and inelastic are relative terms, every bit shown in Figure one, below. As one moves down the demand curve from acme left to bottom correct, the measured elasticity is much greater than one (very elastic), then merely greater than one (somewhat elastic), and so equal to one (unitary elastic, then less than one (somewhat inelastic), and finally much less than one (very inelastic). Note that the epsilon symbol, ε, is oft used to represent elasticity.

Effigy i. Variations in Elasticity. Equally you lot saw earlier, price elasticity of demand ranges from more i at high prices and less than ane at low prices. Measured elasticities decreases as 1 moves down the demand curve from left to correct.

Polar Cases of Elasticity

There are besides two extreme cases of elasticity: when computedelasticity equals zero and when it'due south infinite. We will depict each case.

A perfectly (or infinitely) rubberband demand curverefers to the extreme case in which the quantity demanded (Qd) increases by an infinite amount in response to any decrease in toll at all. Similarly, quantity demanded drops to zero for whatsoever increase in the cost. A perfectly elastic need curve is horizontal, as shown in Effigy 2, below. While it'due south hard to think of real globe example of space elasticity, information technology will be of import when we study perfectly competitive markets. Information technology's a state of affairs where consumers are extremely sensitive to changes in price. Say, for example, if the price of cruises to the Caribbean decreased, anybody would purchase tickets (i.e., quantity demanded would increase to infinity), or when the price of cruises to the Caribbean increased, not a single person would be on the boat (i.eastward., quantity demanded would decrease to zero). Perfectly elastic demand is an "all or zilch" thing!

Figure 2. Infinite Elasticity. This shows a perfectly elastic demand curve.  The horizontal line shows that an space quantity volition be demanded at a specific toll. The quantity demanded is extremely responsive to price changes, moving from zero for prices close to P to infinite when prices attain P.

While perfectly inelastic demand is an extreme case, necessities with no close substitutes are probable to have highly inelastic demand curves. This is the case with life-saving prescription drugs, for example. Consider a person with kidney failure who needs insulin to stay alive. A specific quantity of insulin is prescribed to the patient. If the price of insulin decreases, the patient can't stock up and salve it for the future. If the toll of insulin increases, the patient will keep to purchase the aforementioned quantity needed to stay alive. Perfectly inelastic need means that quantity demanded remains the same when price increases or decreases. Consumers are completely unresponsive to changes in price.

Figure 3. Aught Elasticity. A perfectly inelastic demand curve. The vertical line shows that at whatever price, the quantity demanded remains the same. The measured elasticity is zero.

Final notation: even though perfectly elastic and perfectly inelastic curves represent to horizontal and vertical curves, remember that, in general, elasticity is not the aforementioned as the slope.

Watch It

Spotter this video to see graphed examples of perfectly inelastic, relatively inelastic, unit of measurement elastic, relatively elastic, and perfectly elastic demand.

Try It

Try It

These questions allow you lot to get equally much practice as you demand, equally you can click the link at the top of the get-go question ("Try another version of these questions") to go a new set of questions. Practise until you feel comfortable doing the questions.

Glossary

perfectly (or infinitely) elastic:

the extremely elastic situation of demand or supply where quantity changes by an space amount in response to any change in toll; horizontal in appearance

perfectly inelastic:

the highly inelastic instance of demand in which a percentage alter in cost, no matter how large, results in cypher modify in the quantity; thus, the price elasticity of demand is zero; vertical in appearance

(relatively) elastic:

the percentage change in quantity demanded is greater than the pct change in toll; measured price elasticity of demand is greater than one (in absolute value)

(relatively) inelastic:

the percentage change in quantity demanded is less than the percentage alter in price; measure out price elasticity of demand is less than one (in absolute value)

unitary elastic:

when a given percent price modify in price leads to an equal percentage change in quantity demanded

johnsthead2001.blogspot.com

Source: https://courses.lumenlearning.com/wmopen-microeconomics/chapter/categories-of-elasticity/