Completely elastic demand

Das Konsumverhalten ist ein Wechselspiel aus supply and demand. Ein bekanntes Modell ist die „vollkommen elastische Nachfrage“, welche sich den Zusammenhängen und Auswirkungen anhand eines theoretischen Modells widmet.

Definition / explanation

The model of completely elastic demand describes the relationship between quantity and price on the basis of demand. It is assumed that a product:

  • is bought at a certain price
  • there is a fairly steady and seasonal demand
  • demand is not influenced by other external factors

Should the price of a good rise above a certain price level, then the demand would run directly towards the value 0. However, if the price of the good falls below the original price level, the demand on the market would increase to infinity and theoretically become an infinitely elastic demand.

Completely elastic demand

The model in reality

Suppose there is a fixed price for gasoline. A petrol station suddenly offers petrol cheaper. This increases the demand immeasurably, because the goods are still sold at other petrol stations at the normal (relatively higher price).

This example became true in 2008 due to an error at a gas station in Iserlohn.

Summary

  • Relationship between quantity and price based on demand
  • there is a stable, uncontrollable demand
  • If the price rises above a certain price level, demand runs towards the value 0
  • If the price falls below a certain price level, demand against value runs infinitely
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