elasticity

demand is elastic

A coefficient of 1.5 for price elasticity of demand means that for every 1 pecent chnage in price,  there will be a corresponding 1.5 percent change in quantity demanded in the opposite direction of the price change. Demand is elastic.

• Q₂ - Q₁            P₂ + P₁    
• —————   X   —————
• Q₂ + Q₁            P₂ - P₁

elasticity less than 1

it is called unit elastic

Perfrectly horizontal line on graph

perfect vertical line on graph

the more elastic it is

very elastic at the top and progressively less elastic down the curve

• - has a lot of substitutes
• - when price changes a little and quantity demanded changes a lot

• - has fewer substitutes
• - lots of price change and little change in quantity demanded