Now let's see how elasticity can shape the demand curve on the graph. So we're going to talk about all the different cases, but let's start here with this special case called perfectly elastic. We're also going to have perfectly inelastic on the other end of the spectrum. Perfectly elastic is when the elasticity is so large, it's infinity, right. The elasticity is huge, and we get this demand curve that is just a horizontal line. Horizontal lines do not appear often in the real world, but they do kind of exist in perfectly competitive markets. Underneath you can see that I wrote wheat and foreign currency. These are example products that might have an elasticity of infinity, and when we think of that, it's more when we're thinking about maybe the individual farmer's demand curve. The idea is this farmer could produce any quantity he wanted. He could produce as much wheat as he wanted, or this small amount of wheat right here, a small quantity on our quantity axis, or a huge quantity way up here on our quantity axis, and the market will buy all of it regardless, but the market will only buy it at this price right here. If he tried to charge a higher price, the market would buy none of his supply. So that's the idea: there would be no demand at a different price than this price, but at this price, there's an infinite demand. They'll buy as much as they can at that price. So that's what you'll see in the market for wheat or foreign currency. There's the exchange rate on the market right now, say you can get a Euro for, I don't know, a dollar 7 or something, there's someone who will trade you 1,000, tens of 1,000 of Euros at that price, but if you tried to charge a different price, they wouldn't be having it. Alright, so that is our perfectly elastic demand. That's one extreme of the spectrum.
Let's go ahead to something a little more realistic in elastic demand, and like we said, elastic demand is when our price elasticity is greater than 1, right, and notice we've kind of got this kind of a steep or shallow curve, right? It's kind of almost just a little bit less straight here, and this is where most products are going to have an elastic demand like this. This is going to be things like I've got here beef and transportation. It's things that can be easily substituted, right? So when something has a change in price, people are going to change what they buy. If the price of beef now went up $2 per pound or something, people would go buy chicken instead or buy something else, right? So the quantity demanded of beef would be really affected by a change in price. Just like transportation, you know if the price of taxi rides goes up, people are going to take the bus instead or if the price of cars goes up, people might take the bus or take the taxi or airplane tickets go up, people might take the bus. The idea is they have all these different options, so if the price changes, they're going to take their business elsewhere and you're going to get this elastic demand where you'll see something like this where we've got you know maybe this price right here and this price right here, right? We only change the price just a little bit right? Price went up just a little bit here and what are we seeing with the quantity demanded over here? Let me use a different color for this one. So up here, p2, right, notice what's happening with the quantity here. You raise that price a little bit, and the quantity went way down. Right? The percentage change in that quantity went way down compared to that little change in price. So that's going to be the elastic demand.
Now let's talk about unit elastic. Now this is a special case here where the percentage changes are equal, right? So a 10% increase in price is going to be a 10% decrease in quantity demanded. It's hard to find real-world examples of this, but I found online that clothing is actually pretty close to unit elastic in the sense that a store might have a 40% off sale, right? Where they slash prices by 40% and they'll expect to sell 40% more stuff. So that's about as close as we can get to unit elastic in the real world, and you can see that this curve is kind of standing up a little more. We're going to get situations where our percentage change in price, so the idea here is we got a percentage change in price maybe something like this. So this percentage change in price here, and we get a similar change in our quantity demanded. I want to make a quick note that in some books I've seen them use a straight line kind of in the middle of uni elastic, but it's not totally correct. I mean the idea is that we're in the middle of elastic and inelastic, but you're going to see in further lessons that along a straight line curve, the elasticity is actually changing constantly, so it's a lot more clear to use a curve that looks like this where we kind of see a percentage change happening equally rather than a straight line where the slope is equal. We're going to talk about that more, but the idea here is that you should see that this graph is gradually kind of turning this way. We're kind of, we started flat horizontal, and now we're kind of going this way and this way and this way and this way, and you're going to see where we end up here on the bottom of the page with inelastic and perfectly elastic. Notice how it keeps going in that direction, right, it keeps turning up and up and up. So let's talk about this inelastic demand now, and this is where quantity demanded doesn't change that much compared to the price. This is products usually that people are going to need anyway. So a lot of times people talk about inelastic, they think of cigarettes, right? That's the situation where a price change, right, the government puts a new tax or something, and the price of cigarettes goes up, but people still buy cigarettes because they're addicted to it, right? Or gasoline, we're addicted to gasoline in the same sense, right? We're kind of at the will of the market. We see those gas prices go up, and we're still pumping gas, at least in the short term. Alright, so this is what we see with the inelastic, right? We're going to see kind of this much steeper getting this way, steeper curve. Right? Where we might have this situation where we've got price and quantity. Right? Where we're at this price and quantity, and let's go ahead and say we raise the price quite a bit here this time. So p1 was here. We're going to raise it way up here to like p2, and notice what's happening with quantity. Barely changing, right? Quantity 1 and quantity 2. Compared to that change in price, that change in quantity was not that much, and that's what you can expect from inelastic products like cigarettes or gasoline.
Now we have our most extreme example of inelastic is where elasticity of demand equals 0, and we get this vertical line. This is the other extreme of elasticity here where we're at perfectly inelastic, and this is very rare to find on the market, but some good examples are actually right behind me. Let me get out of the way. You'll see I've got a life-saving drug and table salt. So a life-saving drug, the idea here is that no matter what the price, people are going to buy this anyway. A life-saving drug is a great example. Table salt, not as much, but you can kind of see table salt would almost be more inelastic, but the idea that it's worth so little of our budget, you're going to see that it kind of fits here too. So a life-saving drug, right, this is the idea of this: it recently happened where there was this, I believe it was an AIDS drug that was saying something around $4 a pill, some guy bought up the company, and changed the price to like hundreds of dollars per pill. He increased the price like crazy, and everyone was really mad because they needed this drug, right, no matter what the price they were going to have to buy it, and they were really upset at this huge price increase. So that's what was happening, right? The quantity demanded for this AIDS drug is going to stay constant whether the price is down here, or the price is way up here. Right? So no matter what price we're at, you're going to see that the demand stays the same, and we can kind of see that for table salt, right? Especially when we stay at a very low price, table salt costs not much. So when we see an increase in the price of salt, people still use salt in all their meals, they love having salt at the table, right? It's just a commonplace addition to our meal time, and people aren't going to just stop buying salt because the price went up, you know, from a dollar to a dollar 50 or something like that. So you're going to kind of see the same quantity demanded of salt regardless of the price in a range. That's what we see, we see kind of going from perfectly elastic to perfectly inelastic, we see the curve kind of making this change like this. The good way I like to remember so it's like oh, which one's elastic, which one's inelastic, it's kind of silly, but this is the way I think of it. When I'm perfectly elastic, I'm feeling elastic, I feel, you know, I feel good, I'm tired, it's like, oh, I feel super elastic right now. I'm going to go home and lie in my bed. So that's kind of how I think of it. I'm like I'm elastic, elastic, I'm lying down, and then as we get more inelastic, right, we go from perfectly elastic, lying down super comfortably, and now we start getting up from that situation. Right now, the alarm went off, and we're kind of like got to get
