# Khan academy elasticity. Income elasticity of demand 2019-03-05

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## How long is the entire Khan Academy Economics (Micro & Macro) course?

It would flatten out a good bit, just like that. You can even search the episodes and movies and download them. So you had a relatively large, actually quite large % change in quantity over relatively small % change in price. They're just going to go for the cheapest one. We're going to have a very simple model here. So this quantity demand is going to go to 0.

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## More on elasticity of demand

You can see this phenomenon graphically in diagram A, above on the left. It's a huge, it's actually a 67% change in price. I'm not going to go into the deep mathematics or the calculus of it. So that's going to be that divided by-- it's actually 0. And you might imagine that it probably had something to do with the fact that elasticity of demand is based on % change in quantity relative to % change in prices, instead of just change in quantity over change in price.

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## Elasticity of supply

Huge changes in quantity supplied, elasticity, for small percent changes in price. A 10% decrease in the price will result in only a 4. In diagram A, above on the left, the supply is inelastic and the demand is elasticâ€”as it was in the beachfront hotels example. If the supply were elastic and sellers had the possibility of reorganizing their businesses to avoid supplying the taxed good, the tax burden on the sellers would be much smaller, and the tax would result in a much lower quantity sold instead of lower prices received. So if you have 67% divided by 5%, you get to roughly 13. So it has constant unit elasticity of demand.

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## Price elasticity of demand using the midpoint method

We tackle math, science, computer programming, history, art history, economics, and more. We tackle math, science, computer programming, history, art history, economics, and more. But, by convention, we talk about elasticities as positive numbers. We've thought about how changes in the price of that good affect changes in its quantity. If it was just change in quantity over change in price, we would get something. So this right over here.

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## Elasticity and pricing (article)

However, bands sometimes choose to sell tickets for less than the absolute maximum they might be able to charge, often in the hope that fans will feel happier and spend more on recordings, t-shirts, and other paraphernalia. So this per price % change was in the teens while this quantity % change is going to be with 67% 2 over an average quantity of 3 in this region right over here. The situation shown in diagram A, with extremely inelastic demand, means that a new invention may cause the price to drop dramatically while quantity changes little. When you have large price, you have large quantity. If they're complements, you would have a negative cross elasticity of demand.

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## Price elasticity of demand using the midpoint method

So if you move 2 on a low base, you are going to have a large % change in quantity and your prices are relatively high here. So I'll leave you there in this video, and just I want you to really kind of internalize what we're doing here, especially with the maths. Classify the elasticity at each point as elastic, inelastic, or unit elastic. We just want to simplify it for the sake of our model right over here. So this per price % change was in the teens while this quantity % change is going to be with 67% 2 over an average quantity of 3 in this region right over here.

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## Constant unit elasticity (video)

When we just did regular price elasticity of demand, the only way that you would increase quantity for a traditional goods was by lowering price. So at any point here, the two are going to be proportional. Make sure that they make intuitive and mathematical sense to us because something slightly strange happened. But remember, our quantity is only at 1. And so there you see that the demand curve is getting very flat. We have approximately a 67% change in price based on how we just calculated. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps.

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## Elasticity of supply

Anyway, hopefully you found that interesting. And so when you have near substitutes, or nearly perfect substitutes, for each other, like this example right here, the cross elasticity of demand approaches infinity. So for example, let's say we have a lemonade stand of some sort. So this right over here is approaching perfect elasticity. With a highly inelastic demand curve, coffee prices fell dramatically.

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