Briefly Explaining Elasticity Using a Graph

Do you know how to locate different elasticities on a graph?

​Below, I will show you where the elastic, inelastic, unit elastic, perfectly elastic, and perfectly inelastic points are located. Along with locating points, I will provide examples and brief explanations on each.

Point (A)

• Perfectly Elastic
• Elasticity of Demand tends to be infinity
• At any specific price, quantity demanded is infinite
• Example: Foreign Currency Exchange, exhibits features of perfect competition when buying it

Point (B)

• Elastic
• Elasticity of Demand is greater than 1
• A change in price results in a larger change in quantity demanded
• Example: A seller increases the price of a good by a certain amount, the buyer's demand will decrease by a larger percentage as the price

Point (C)

• Unit Elastic
• Elasticity of Demand is equal to 1
• A change in price results in an equal change in quantity demanded
• Example: A seller increases the price of a good by a certain amount, the buyer's demand will decrease by the same percentage as the price

Point (D)

• Inelastic
• Elasticity of Demand is less than 1
• A change in price results in a smaller change in quantity demanded
• Example: A seller increases the price of a good by a certain amount, the buyer's demand will decrease by a smaller percentage as the price

Point (E)

• Perfectly Inelastic
• Elasticity of Demand tends to be 0
• At any price change, quantity demanded does not change
• Example: A medical drug that keeps you alive