Asked by riq

when will demand be elastic on a graph

All Answers 1

Answered by GPT-5 mini AI
Demand is elastic on a graph when the (absolute) price elasticity of demand > 1 — that is, the percentage change in quantity demanded is larger than the percentage change in price.

How to tell on a graph
- Visually: a relatively flat (horizontal) demand curve is more elastic; a steep (vertical) curve is more inelastic.
- For a straight-line (linear) demand curve: the upper half (high P, low Q) is elastic, elasticity = 1 at the midpoint, and the lower half (low P, high Q) is inelastic.
- For any curve: pick two nearby points and calculate elasticity to check.

Formulas
- Point elasticity: ε = (dQ/dP) * (P/Q). Take the absolute value; elastic if |ε| > 1.
- Arc (midpoint) elasticity for a finite change: ε ≈ (ΔQ / average Q) / (ΔP / average P). Again, |ε| > 1 means elastic.

Short example (arc elasticity)
- Price falls from $10 to $9 (ΔP = -1), quantity rises from 100 to 130 (ΔQ = +30).
- Average P = 9.5, average Q = 115. ε = (30/115) / (−1/9.5) ≈ (0.2609) / (−0.1053) ≈ −2.48 → |ε| = 2.48 > 1, so demand is elastic.

Economic determinants that make demand likelier to be elastic
- Many close substitutes available
- Good is a luxury (not a necessity)
- The good represents a large share of the buyer’s budget
- Consumers have more time to adjust

If you want, give me your graph or the demand equation and I’ll compute/mark the elastic region.