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### Course: AP®︎/College Microeconomics>Unit 2

Lesson 3: Price elasticity of demand

# Constant unit elasticity

An interesting case of price elasticity of demand is a demand curve with a constant unit elasticity. Explore what such a demand curve would look like in this video. Created by Sal Khan.

## Want to join the conversation?

• What are some examples of goods that have fairly consistent unit elasticity?
• Elasticity is a mathematical concept related to various factors such as necessity, substitutes, price, income, habits, and durability, rather than the notion of it being an intrinsic value specific to goods. Certain situations may make necessities elastic and vice versa.
Inelastic goods are most often than not necessary goods and elastic goods are most often than not luxury goods. But goods which have unit elasticity do not have a notable singular quality. Rather than a distinctive category, the label "goods with unit elasticity" is just a way to describe a situation wherein a certain good's elasticity equals one.
In the viewpoint of businesses, goods with unitary elasticity are those that bring in the same total revenue, regardless of price change.
• I don't understand why the graph is curved?
I thought it would be a straight line.
Because constant unit elasticity means if price goes down by 1, quantity increase by 1.
Shouldn't the slope be 1 then?
• Because it may not always be a 1:1 ratio. As price goes up the demand approaches zero gradually.
• Why there is no perfect example of unitary elasticity in real life??
• Because constant unite elasticity, like perfect elasticity and perfect inelasticity, only exists in mathematical concept. Therefore, you cannot find a real life example.
• Find the price elasticity of demand for the curvilinear demand function of the form
Q= aP^-b
(A) -b
(B) b
(c) 1
(D) None of the above.
• Is it me or does the graph seem to look a lot like a exponential decay curve?
• I don't understand why the graph is curved?
(1 vote)
• Because that is the mathematical consequence of assuming "unit elasticity". Saying "the elasticity is always 1" is just another way of saying "The curve is shaped like this"
• What was the 1 E d Number?
• the Price Elasticity of demand value used in this example
(1 vote)
• How would you calculate when the slope is equal to -1?
(1 vote)
• calculation of values on the slope is discussed in last video % change in Q/ % change in price