2.13 : Degrees of Elasticity of Demand and the Demand Graph

Demand curves visually represent how consumers respond to changes in prices. The elasticity of demand determines the steepness of the curve, with higher elasticity resulting in a flatter curve and lower elasticity leading to a steeper curve.

Perfectly Elastic Demand: Represented by a horizontal line, indicating that any change in price results in an infinite change in quantity demanded. Although this is a theoretical extreme, it signifies a scenario where consumers are extremely sensitive to price changes.

Relatively Elastic Demand: Demand curves for relatively elastic goods are flatter, indicating that the percentage change in quantity demanded is greater than the percentage change in price. This category typically includes luxury goods and non-essential items, where consumers are more responsive to changes in price.

Unitary Elastic Demand: Represented by a demand curve that forms an intermediate slope, indicating that the percentage change in quantity demanded equals the percentage change in price. This suggests a proportional response of quantity demanded to price changes.

Relatively Inelastic Demand: Demand curves for relatively inelastic goods are steeper, indicating that the percentage change in quantity demanded is less than the percentage change in price. This category encompasses necessities and everyday items, where consumers are less sensitive to price changes.

Perfectly Inelastic Demand: Represented by a vertical line, signifying that quantity demanded remains constant regardless of price changes. This is often seen with essential goods like medicines, where consumers are willing to pay any price for the product.