Understanding Price Elasticity of Demand
📌 Demand elasticity measures how sensitive quantity demanded is to a change in price, contrasting the basic inverse relationship.
⛽ Inelastic Demand occurs when quantity changes very little despite a price change; products like gasoline typically fall here due to having few substitutes and being a necessity.
⚖️ The elasticity of demand coefficient is calculated as the percent change in quantity divided by the percent change in price; inelastic demand results in a coefficient less than one (in absolute value).

Types of Elasticity and Coefficients
🔗 Elastic Demand means quantity is highly sensitive to price changes (coefficient greater than one), characteristic of luxuries or products with many substitutes.
↔️ Unit Elastic occurs when the percent change in quantity exactly equals the percent change in price, yielding a coefficient of one (1).
🚫 Perfectly Inelastic Demand (coefficient zero) means price changes have no effect on quantity demanded (vertical demand curve).
♾️ Perfectly Elastic Demand (coefficient infinite) occurs when any price change causes the quantity demanded to drop to zero (horizontal demand curve).

The Total Revenue Test
📈 For inelastic demand, if price goes up, total revenue goes up (and vice versa), explaining why gas stations rarely offer sales.
📉 For elastic demand, if price goes up, total revenue falls (and vice versa); this is why products with elastic demand frequently have sales.
📝 A key test insight: If the price increases and total revenue decreases, the demand must be elastic.

Key Points & Insights
➡️ Inelasticity Check: If price $\uparrow$ and Total Revenue $\uparrow$, or if price $\downarrow$ and Total Revenue $\downarrow$, the demand is inelastic (visually resembling an "I").
➡️ Elasticity Check: If price $\uparrow$ and Total Revenue $\downarrow$, or if price $\downarrow$ and Total Revenue $\uparrow$, the demand is elastic (not resembling an "I").
➡️ Products with more substitutes will inherently have a greater elasticity of demand coefficient.

📸 Video summarized with SummaryTube.com on Dec 15, 2025, 17:55 UTC