Social Sciences and History / Unit 13 SSH 1221 worked example, 60 to 90 seconds
Elastic, Unit, Inelastic: Placing a Response in Its Band
The idea
The exam gives percentage changes or a description and asks whether demand or supply is elastic, unit elastic or inelastic, and the anchor's bands decide. Compute elasticity as percentage change in quantity over percentage change in price, taking the absolute value. Greater than one is elastic: quantity responds more than proportionally. Equal to one is unit elastic: a given percentage change in price brings an equal percentage change in quantity. Less than one is inelastic: quantity responds less than proportionally. Two polar cases sit at the ends: infinite or perfect elasticity, where any price change moves quantity by an infinite amount, drawn horizontal; and zero elasticity, where no price change moves quantity at all, drawn vertical. Constant unitary elasticity holds one all along the curve.
In practice
Given "price rose five percent and sales fell fifteen", three, elastic. Given "price rose ten percent and sales fell ten", unit elastic. Given "price doubled and sales fell four percent", inelastic. Given "the firm can sell any amount at the market price but none above it", perfectly elastic demand, horizontal. Given "a lifesaving dose bought at any price", near zero elasticity, vertical. Ask which percentage is larger.
Where people slip
The trap is the sign: demand elasticities are negative and the anchor compares magnitudes. The second trap is the glossary's "zero inelasticity", a wording slip; the summary's zero elasticity is the term.
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