2.2.4—Elasticity values

Perfectly elastic demand has an infinitesimal price change causing an enormous quantity response; perfectly inelastic demand has zero quantity response. Elastic, unitary and inelastic lie between these extremes according to |coefficient| greater than, equal to or less than one.

The label applies to the relevant section or point of the curve, not automatically to the whole market. Revenue implications depend on which side of unit elasticity demand lies.

A PED of −1.5 is elastic; −1.0 is unitary; −0.4 is inelastic. A vertical demand curve is perfectly inelastic in the diagram.

“Elastic” does not mean quantity changes without limit; it means the percentage response is greater than the percentage price change.