Draw two supply/demand graphs, one with a highly elastic demand and the other with a highly inelastic demand. (If you don’t know what this means, review elasticity.) Give your two supply curves a similar slope and make the equilibrium price the same for both graphs. On each graph put a price floor at the same level and identify the surplus and deadweight loss. In which case is the effect from the price floor larger?
Draw two supply/
A good can be considered as highly elastic if a small change in its price can cause a huge change in demand. Other economic factors like income, substitutability, taste and preference can also cause a huge fluctuation in demand with little or small change in price.
Similarly, a good is inelastic, when there is little to no significant change in quantity demanded of the good, because of change in income, price, substitutability, taste and preference. Normal goods like toothbrush, which have zero substitutability, wherein an individual buyer will not switch to other forms of brushing teeth when there is an increase in the price of the toothbrush.
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