Microeconomics,, 16th Canadian Edition

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The numerical value of demand elasticity can vary from zero to infinity.
First consider the extreme cases. Elasticity is zero when a change in price
leads to no change in quantity demanded. This is the case of a vertical
demand curve, and it is quite rare because it indicates that consumers do
not alter their consumption at all when price changes. At the other
extreme, when even a very small change in price leads to an enormous
change in quantity demanded, elasticity is a very large number. In these
situations, the demand curve is very flat, almost horizontal. (In the rare
limiting case, the demand curve is perfectly horizontal and elasticity is
infinite.) Most of reality lies between the extremes of vertical and
horizontal demand curves. We divide this “realistic” range of elasticities
into two regions.


When the percentage change in quantity demanded is less than the
percentage change in price there is said to be inelastic
demand. For example, if price rises by 10 percent, quantity demanded
falls by less than 10 percent. When the percentage change in quantity
demanded is greater than the percentage change in price there is
said to be elastic demand For example, if price rises by 10 percent,
quantity demanded falls by more than 10 percent. The dividing line
between these two cases occurs when the percentage change in quantity
demanded is exactly equal to the percentage change in price, and so
elasticity is equal to 1. For example, if price rises by 10 percent, quantity
demanded falls by exactly 10 percent. Here we say that demand is unit
elastic.


A demand curve need not, and usually does not, have the same elasticity


(η< 1 ),

(η> 1 ),
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