Concept of Elasticity
Elasticities of Demand
AO1·AO4·Diagram required
Syllabus requirement
General concept describing responsiveness of one variable to changes in another, with focus on demand responsiveness.
Assessment objectives
AO1 Knowledge and UnderstandingAO4 Use of Appropriate Skills
Required diagram: Diagrams showing relatively elastic and relatively inelastic demand curves based on the steepness of the demand curve.
Summary
This topic explains elasticity of demand, which measures how responsive quantity demanded is to changes in factors such as the product price or consumers’ real disposable income. It distinguishes price elastic demand (where small price changes cause large changes in quantity demanded) from price inelastic demand (where quantity demanded changes little when price changes) and shows how availability of close substitutes and necessity influence elasticity. Diagrams of relatively steep and relatively flat demand curves illustrate these concepts for IB exam questions.
