Lesson preview · Price Elasticity Of Demand
Perfectly Elastic and Perfectly Inelastic
~5 min · Free to read
Most goods live somewhere between ‘kinda elastic’ and ‘kinda inelastic.’ Economists also study the edge cases — the theoretical extremes. They almost never exist in the real world, but they show what demand curves look like at the boundaries.
Key Term
Perfectly Inelastic Demand
. Quantity demanded doesn’t change AT ALL when price changes. The demand curve is a vertical line. Consumers buy the same quantity no matter what.
The classic example is a life-saving drug with no substitutes. If insulin quadruples in price, a diabetic still needs exactly the same amount — zero substitutes, zero flexibility. The demand curve stands straight up.
Key Term
Perfectly Elastic Demand
. At one specific price, consumers will buy any quantity. If the price rises even a tiny bit, demand drops to zero. The demand curve is a horizontal line.
This sounds bizarre but it’s how we model perfectly competitive markets. Imagine one wheat farmer among thousands. If she tries to charge even one cent above the market price, buyers just go to a competitor — her demand drops to zero instantly. At the market price, she can sell as much as she wants.
Check yourself · no marks
If a demand curve is drawn as a vertical line on a graph, what does that tell you about PED?
Commit to one first. Guessing and being wrong beats reading the answer cold.
Tip
Remember the shapes
Perfectly inelastic → vertical line (price changes, quantity doesn’t). Perfectly elastic → horizontal line (quantity changes freely, price doesn’t). Mnemonic: ‘inelastic’ stands tall, ‘elastic’ lies flat.
Worked Example
A dialysis patient needs exactly 3 treatments per week. The price rises from 200 dollars to 500 dollars per treatment. She still gets 3 treatments per week. Classify the demand.
Practice · 1 / 4
A perfectly elastic demand curve is drawn as:
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